An Empirical Study of Net Job Creation, Firm Size and Firm Age in China

Abstract

Based on the data set from Chinese Industrial Enterprises Database (2003–2008), this article first quantifies the net job creation of industrial enterprises in China by three methods: the base-year method ( Birch, 1979 ), the average-year method ( Davis, Haltiwanger, & Schuh, 1996 ) and the dynamic method (Davidsson, 1998). After evaluating from the results, it is concluded that the dynamic method is more precise than others. By adapting the dynamic method to the database, this article reaffirms that small and medium enterprises (SMEs) in China are the dominated power in terms of job creation. Furthermore, relationships between net job creation and several enterprise characteristics, including enterprise size, age, average salary and asset are investigated with the data calculated by the dynamic method. Instead of conventional linear regressions, a lognormal simulation is found to be more suitable to describe those relationships. Finally, the conclusion in this article indicates that not only the SMEs but also young enterprises (under the age of 5) are the major force in creating jobs in China.