Employment Generation by Small Firms in Spain

Abstract

Despite the relevance in terms of policy, we still know little in Spain about where and by whom jobs are created, and how that is affecting the size distribution of firms. The main innovation of this paper is to use a rich database that overcomes the problems encountered by other firm-level studies to shed some light on the employment generation of small firms in Spain. We find that small firms contribute to employment disproportionately across all sectors of the economy although the difference between their employment and job creation share is largest in the manufacturing sector. The job creators in that sector are both new and established firms whereas only new small firms outperform their larger counterparts in the service sector. The large annual job creation of the small firm size class is shifting the firm size distribution towards the very small production units, although not uniformly across industries of different technology intensity.

Innovation and job creation: a sustainable relation?

“…However, over the analysed period the Spanish economy was characterised by a relatively low-exit rate 15 which limits the corresponding bias to a certain extent 16 . Moreover, according to Lopez-Garcia et al (2009), in general, Spanish start-ups tend to have a first year employment growth higher than that of subsequent years. In the empirical analysis, we controlled for the age of each firm which may has partially corrected the bias introduced due to the latter shortcoming.…”

“…See, for instance,Lopez-Garcia et al, 2009; Lopez-Garcia and Puente, 2007a/b;Nunez, 2004;and Ruano, 2000. …”