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Details on The OECD firm-level study

 

Introduction

Research Protocol

Description of the data

Indicators collected for firm dynamics

Presentation of the country files

Links to OECD work in this area

 

Introduction

        Empirical studies based on micro-level longitudinal data have rapidly increased in number over the recent past (see Ahn (2001) for a survey). Most of them, however, focus on the United States and results for other countries are often difficult to compare because of differences in the underlying data and/or in the methodology used by researchers. This makes it difficult to assess the impact of differences in institutions and policy settings across countries on observed performance.

        The OECD firm-level project described here involves ten OECD countries (United States, Germany, France, Italy, United Kingdom, Canada, Denmark, Finland, the Netherlands and Portugal), with the active role of experts in these countries. It draws upon a common analytical framework, including the harmonisation, to the extent possible, of key concepts (e.g. entry, exit, or the definition of the unit of measurement) as well as the definition of common methodologies for studying firm-level data. 

        The analysis of firm demographics is based on business registers (Canada, Denmark, France, Finland, Netherlands, United Kingdom and United States) or social security databases (Germany and Italy). Data for Portugal are drawn from an employment-based register containing information on both establishments and firms. These databases allow firms to be tracked through time because addition or removal of firms from the registers (at least in principle) reflects the actual entry and exit of firms. The research protocol used to work within this restriction is described below.

          An indepth analysis of firm demographics is presented in  Scarpetta, et al, "The role of policy and institutions for productivity and firm dynamics: Evidence from micro and industry data", OECD Economics Department Working Papers, 2002.

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Research Protocol

        The construction of longitudinal firm-level data is often complex, and requires specialised knowledge and experience of the data sources. For example, tracking firms through business registers requires an in-depth understanding of how registers are designed and changes that occur to them over time. Firm-level data are also subject to various protocols (often embodied in legal requirements) relating to the protection of information. The data are typically only accessible to designated individuals and output prepared for wider circulation usually has to be vetted before being released. Sometimes certain output data has to be suppressed because they do not pass rules aimed at protecting individual firms from being identified.

        In order to work within these constraints, the firm-level project consisted of country experts taking part in a network. All experts participated in the design of the analytical framework of the study and, in particular, each of them co-led one of the teams in which the study is organised. The other task was to collect and analyse national data for all themes according to common procedures. At an early stage in the process, meta-data were collected describing the data available in the various countries. At a face-to-face meeting hosted by the OECD, the basic policy questions were confronted with the data realities and choices were made regarding the exercises that could be done on a consistent basis in all, or most, countries.

        For the sub-theme firm dynamics, pseudo-code was developed and coded into programmes that could be adopted by the country experts into computer code to run on their own databases. Where possible the input datasets were standardised to ease the adaptation of programmes. The output datasets were completely standardised and shared among team members.

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Description of the data

The key features of the data on firm dynamics are as follows:

 

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Indicators collected for firm dynamics

        The use of annual data on firm dynamics implies a significant volatility in the resulting indicators. In order to limit the possible impact of measurement problems, it was decided to use definitions of continuing, entering and exiting firms on the basis of three (rather than the usual two) time periods. Thus, the tabulations of firm dynamics contained the following variables:

This method of defining continuing, entering and exiting firms implies that a change in the stock of continuing firms (C) relates to entry (E) and exit (X) in the following way:

   Ct  - Ct-1 = Et-1 - X                                [1]

This has implications for the appropriate measure of firm "turnover". Given that continuing, entering, exiting and "one-year" firms (O) all exist in time t then the total number of firms (T) is:

  Tt = Ct + Et + Xt + O                               [2]

From this, the change in the total number of firms between two years, taking into account equation 1, can be written as:

                      Tt - Tt-1 = Et - Xt-1 + Ot - Ot-1                [3]

Thus, a turnover measure that is consistent with the contribution of net entry to changes in the total number of firms should be based on the sum of contemporaneous entry with lagged exit.

In practice, a number of complications arise in constructing and interpreting data that conform to the definitions of continuing, entering and exiting firms described above. In particular, the "one-year" category, in principle, represents short-lived firms that are observed in time t but not in adjacent time periods and could therefore be treated as an additional piece of information in evaluating firm demographics. However, in some databases this category also includes measurement errors and possibly ill-defined data.

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Presentation of the country files

The OECD firm-level database is organised in different EXCEL files, one for each country. The files have the same structure, as follows:

 

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Links to OECD work in this area

Eric Bartelsman, Stefano Scarpetta and Fabiano Schivardi, Comparative analysis of firm demographics and survival: micro-level evidence for the OECD countries, OECD Economics Department Working Paper No.348, January 2003.

Stefano Scarpetta, Philip Hemmings, Thierry Tressel and Jaejoon Woo,  The role of policy and institutions for productivity and firm dynamics: Evidence from micro and industry data
OECD Economics Department Working Paper No.329, April 2002.

Sanghoon Ahn, Firm dynamics and productivity growth: a review of micro evidence from OECD countries, OECD Economics Department Working Paper No.297, June 2001.

OECD Science, Technology and Industry (STI)  Working Papers on Measuring Industrial Performance

The OECD Workshop on Firm-Level Statistics and Enterprise Demography  (November 2001).

The OECD Economics Department Growth and Productivity Homepage.

The OECD Science, Technology and Industry page on Measuring Industrial Performance.

 

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Project Experts

The OECD firm-level project described here involves ten OECD countries.  The experts involved in the study are:

 

Footnotes:

1. Establishment or plant-level data may, in theory, offer a better picture of entry and exit processes in each given market, but such data are not available for many of the countries involved in the study. For a discussion on how different unit of measurements (firm versus establishment) as well as different data sources may affect the assessment of entry and exit see Baldwin, J.R., Beckstead, D. and Girard, A. (2002), "The importance of entry to Canadian manufacturing with an appendix on measurement issues", Statistics Canada, Analytical Studies Branch research papers, Catalogue No.: 11f0019mie2002189.

2. Eurostat (1995), "Recommendation Manual: Business Register", Doc.Eurostat/D3/REP/2rev8.

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