This paper analyzes the effect of self-employed persons' education on the success of their firms during the economic downturn and upturn of the 1990's. It is found that the business cycle affects the relative closure rates of firms run by self-employed with any level of education. Exit probability is lower for the highly educated during bust, but higher in boom. This is accounted for by two facts. First, running a small firm is argued to be a less attractive choice to wage work, particularly for the highly educated, due to lower earning prospects, less stable stream of earnings, and the cultural tradition of working in large corporations. Second, the highly educated faced a higher outside demand for their labor than did the less educated during economic upturn. Finally, it was found that regardless of the state of aggregate economy, firms run by the highly educated have higher growth probabilities than those run by less educated persons. Copyright 2000 Gatton College of Business and Economics, University of Kentucky.
AKI KANGASHARJU IS AN ECONOMIST AT Pellervo Economic Research Institute, Helsinki, Finland. The present paper investigates the determinants of small firm growth in Finland during the strong economic fluctuations of the years 1988- 1995. The paper uses longitudinal data on 26,057 owner-managers and their associated small firms. Results support the life-cycle effect of a firm, i.e. new firms have a higher growth probability than older ones, providing that the firms considered survive. In a similar vein, firms run by younger owner-managers have higher growth probability than those run by older counterparts. Results also indicate that economic fluctuations strongly affect the growth probability of small firms. On the other hand, results indicate that once corrected for the level effects, the probability of growth was affected by the firm and owner-manager characteristics virtually the same way over the entire business cycle.
This article investigates regional variations in firm formation in Finland between 1989 and 1993, and estimates the effects of regional factors on firm formation utilising panel and cross-sectional data. Panel data evidence shows that the average size of firms and establishments in the subregions tends to explain firm formation in Finland most robustly. Cross-sectional results for Finland and several other countries tend to show that demand growth is also an important factor explaining regional firm formation. Panel data results appear to differ from the cross-sectional ones.JEL classification: R12, C33
This paper examines whether subsidized jobs have contributed to employment in subsidized firms or have merely substituted for non-subsidized ones. The data-set is an unbalanced panel of some 31,000 firms that are followed annually between 1995 and 2002. The analysis is based on difference-in-differences, which is adjusted by regression and matching methods. The results indicate that wage subsidies stimulate employment, and that the magnitude of the effect is as aimed. I also found that subsidies have no sizeable effects on non-subsidized firms of the industry or the geographical area in question. Copyright (c) The London School of Economics and Political Science 2006.
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