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Firm dynamics in job growth - employment growth determinants



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Understanding the determinants of employment growth is important in light of the concentration of population and employment in urban centres. As economic activity concentrates, smaller urban centres, and rural areas and towns find themselves at a growing disadvantage. Yet not all small urban or rural towns share the same experience. Moreover, not all urban centres grow significantly. It is thus of academic interest to discover more precisely what the employment growth determinants are.Another aspect of employment growth is the particular source of employment change. Employment growth is not single-dimensional, but it has four components (growth from firm births and business expansions; and decreases from firm deaths and business declines), each of which may have unique determinants. Thus, in investigating the determinants of employment change, it is important to recognize the businesses’ life cycle and test whether the key influences vary over that life cycle. This study empirically estimates the determinants of employment growth and assesses their role and relative importance in a community’s job growth. The major determinants include industrial composition, human capital, spatial variables and policy variables. The study is carried out at two levels: sub-provincial and provincial and covers the years 1983-1999. Two econometric methods of estimation are applied, random effects and fixed effects. An important finding is that there are significant differences among the four components of employment change. This implies that when we simply examine overall employment growth we are masking very different effects that the determinants of employment change have among the four components of job growth. At the community level industrial diversification assists the growth of expanding firms and boosts employment due to the establishment of new businesses. On the other side, communities that have high industrial concentration experience lower employment losses from declining and exiting firms. Regions with a higher share of population that has received some post secondary education have, ceteris paribus, higher job growth rates. Another finding is that the farther away a community is situated from a large Census Metropolitan Area, the less employment growth it has. These results offer significant refinements to undifferentiated employment change findings.



regional growth, business dynamics, job creation and destruction, sub-provincial



Master of Science (M.Sc.)


Agricultural Economics


Agricultural Economics



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