Abstract
This paper analyses the importance of entrepreneurs in terms of job creation and wage growth. Relying on unique data that cover all establishments, firms and individuals in the Danish private sector, we are able to distil a number of different subsets from the total set of new establishments—subsets which allow us to more precisely capture the “truly new” or “entrepreneurial” establishments than has been possible in previous studies. Using these data, we find that while new establishments in general account for one-third of the gross job creation in the economy, entrepreneurial establishments are responsible for around 25% of this, and thus only account for about 8% of total gross job creation in the economy. However, entrepreneurial establishments seem to generate more additional jobs than other new establishments in the years following entry. Finally, the jobs generated by entrepreneurial establishments are to a large extent low-wage jobs, as they are not found to contribute to the growth in average wages.
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Notes
See also Storey (1991) for an earlier discussion of the problems in identifying the “wholly new firms” among the set of new or entrant firms.
Note that we exclude all establishments that belong to these industries in at least 1 year.
By “same employees” is meant that at least 30% of the employees should be present in both years.
van Stel and Storey (2004) have previously used new registrations for VAT as a measure of firm births.
For example, adding 23% to job creation by TNF establishments in 1999 while reducing job creation by new establishments by 4% (as suggested by the 2-year ahead measures in the lower part of Table 5) can raise the share of TNF establishments in job creation by new establishments from the 15.6% reported in Table 4 to 20%. This in turn could raise their share in total job creation by 1–2 percentage points.
In this section, employment is measured as the number of fulltime equivalent workers.
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Acknowledgements
We thank the National Agency for Enterprise and Housing for financial support for this project. Sørensen also gratefully acknowledges financial support from Tuborgfondet.
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Malchow-Møller, N., Schjerning, B. & Sørensen, A. Entrepreneurship, job creation and wage growth. Small Bus Econ 36, 15–32 (2011). https://doi.org/10.1007/s11187-009-9173-y
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DOI: https://doi.org/10.1007/s11187-009-9173-y