Essay, Research Paper: Longitudinal Establishment Datasets
generated quite a bit of excitement in both the academic and the statistical
communities. From this literature, we have learned that there is a large amount
of volatility at the individual establishment level that underlies the smooth
time series of aggregate employment growth. The descriptive statistics coming
out of this literature have not only stimulated the review and updating of
existing labor market theories, but have also stimulated the U.S. statistical
agencies to develop their administrative datasets in such a way so as to produce
longitudinal job flow statistics. The purpose of this paper is to use a new
longitudinal database from the Bureau of Labor Statistics (BLS) in order to
examine how establishment births and deaths contribute to job creation, job
destruction, and net employment growth at different frequencies of measurement.
Despite all that we have learned about the labor market from the existing job
flows literature, the conclusions that can be drawn from these studies are
somewhat limited. First, almost all of the existing work using U.S. data has
been restricted to the manufacturing sector. Recent work by several authors has
illustrated how job creation and job destruction in manufacturing may not be
representative of the entire U.S. economy. 1 A second limitation is that most of
the existing empirical work on job flows, either by choice or by necessity, is
based upon data that excludes the smallest establishments. 2 Since most
establishment births and deaths are quite small, at least in the short run, we
are thus unsure how these births and deaths influence employment growth. While
data that focuses on large establishments will cover most employment, an
analysis of job flows depends on the magnitude of employment flows at continuing
establishments relative to the incidence and average size of establishment
births and deaths. The longitudinal database introduced in this paper is not
subject to either of these limitations. The microdata upon which this paper is
based are the unemployment insurance reports that 1 The studies by Davis and
Haltiwanger (1990, 1992), Davis, Haltiwanger, and Schuh (1993, 1996), and Dunne,
Roberts and Samuelson (1988, 1989a, 1989b) have all used manufacturing data
housed at the Center for Economic Studies at the U.S. Census Bureau. Recent work
with unemployment insurance data by Anderson and Meyer (1994), Foote (1997),
Lane, Stevens, and Burgess (1996), and Leonard (1987) has looked at other
sectors of the economy. 2 Small plants with less than five employees are not in
the sample frame of the Annual Survey of Manufactures (ASM) data used by Davis,
Haltiwanger, and Schuh (1996); these plants represent about one-third of all
plants and about 4 to 7 percent of employment. Using the Census of Manufactures,
Dunne, Roberts and Samuelson (1989a) exclude manufacturing plants with less than
5 employees; these excluded plants account for between 30 and 40 percent of all
plants but represent only one percent of employment. The firm sample used by
Anderson and Meyer (1994) includes only firms with at least 50 employees; this
sample accounts for 83 percent of employment.
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