Using Worker Flows to Measure Firm Dynamics

Abstract

Information on firm dynamics is critical to understanding economic activity, yet is fundamentally difficult to measure. In this article we introduce a new way of capturing dynamics: following clusters of workers as they move across administrative entities. We show that a worker flow approach improves linkages across firms in longitudinal business databases. The approach also provides conceptual insights into the changing structure of businesses and employer-employee relationships. Many worker-cluster flows involve changes in industry particularly movements into and out of personnel supply firms. Another finding, that a nontrivial fraction of firm entry is associated with such flows, suggests that a path for firm entry is a group of workers at an existing firm starting a new firm.

Female Hires and the Success of Start-up Firms

“…Firm identifiers are observed from the entry of the first employee to the exit of the last workers. As the identifiers are assigned for purely administrative purposes we use a worker-flow approach (Benedetto et al, 2007) to identify start-ups of enterprizes from identifier re-assignments or spin-offs of smaller units of existing firms. Similarly, to determine survival times we distinguish exit events due to firm closure, identifier re-assignment or take-over.…”

Towards an integrated approach to industry dynamics and labour mobility

“…While this type of data has been increasingly used within labour economics, its potential for the advance of knowledge in the field of industrial dynamics is still rather unexploited. 18 One example of a fruitful use of matched employer-employee data in the field of industrial dynamics -which is not exactly related to the problem dealt with in this paper -was recently given by Benedetto et al (2004). Empirical work in industrial dynamics has often used administrative data to follow the firms' trajectories trough time; one problem with such data, which has been recurrently identified (but not satisfactory solved), is the fact that entry and exit can be mistakenly measured, since simple changes of ownership or legal form of organizations may modify the administrative identifiers with no other change in economic activity.…”

Does the Use of Worker Flows Improve the Analysis of Establishment Turnover? Evidence from German Administrative Data

“…More recently information on worker flows between employers has been used, since it is usually presumed that if the work force is identical in two consecutive years, then there is a high probability that these records relate to the same firm or establishment. This approach has been used for administrative datasets, among others, in Italy (Revelli 1996, Contini 2007, Finland (Vartiainen 2004), the U.S. (Benedetto et. al.…”

“…This is particularly problematic in research projects that focus on entering and exiting firms, for example analyzing the role of firm entries and exits for employment growth (and the lack thereof) during the great recession. 1 A possible solution to this problem has gained popularity more recently (See for example Benedetto, Haltiwanger, Lane, McKinney 2007 andVilhuber 2009): If individual workers can be linked to the EIDs and the individuals can also be followed over time, one can identify ID changes as events where large groups of worker simultaneously leave an exiting EID and enter a new EID. Thus using information on worker flows offers a way to generate consistent EIDs over time and correct for mistakes.…”

“…In this case the change of a firm identifier should not be counted as a firm exit in one and an entry in the next period. Furthermore it is generally thought that firm restructuring events such as merger, acquisitions and outsourcing should generally not be considered as components of job creation and destruction (For a discussion see Persson 1999;Baldwin et al 2002;Benedetto, Haltiwanger, Lane and McKinney 2007;Vilhuber 2009;Geurts, Ramioul and Vets 2009).…”