Industry and globalisation

Employment and Productivity

 

Productivity and employment are key issues for policy makers, but ones in which the role of firms is only partially understood. Evidence shows that even within a narrowly-defined sector, there can be great heterogeneity in firms’ contribution to employment creation and productivity. To better quantify this heterogeneity, and to better understand how it may link to differences in performance across sectors and countries, it is crucial to go beyond averages.

The OECD Directorate for Science, Technology and Innovation leads two innovative projects, DynEmp and MultiProd: The micro drivers of aggregate productivity, using firm-level data to build a clearer picture of how different groups of firms contribute to employment and productivity, and how this contribution responds to crises and policies.

Because firm-level data is often confidential, both DynEmp and MultiProd share a common approach: the OECD develops statistical routines that can be run by national experts on confidential data. The programmes generate micro-aggregated data that alleviate the confidentiality issues, while preserving the underlying firm-level sources. The resulting database is used by the OECD to carry out harmonised cross-country analyses.

DynEmp focuses on building new empirical evidence on the role of creative destruction, start-ups and young firms to support the design of better policies for employment. In its first phase of data collection, the project found that among small and medium entreprises, young firms in particular play a central role in the creation of jobs. It also established that the financial crisis affected young firms relatively more, but given their larger weight in the economy, most jobs were destroyed by older businesses. The project is now undergoing its second phase with additional countries, a more precise sectoral split and additional statistics on high- and low-growth firms.

MultiProd aims at furthering our understanding of how productivity is distributed in the economy and how this distribution might affect aggregate productivity. In particular, the project aims at

  • Quantifying the contribution of certain groups of firms to aggregate productivity, in particular large versus small firms, young versus old firms, and firms close to test performers;
  • Measuring how well resources flow to the most productive elements in the economy, and how policies might impact this allocative efficiency;
  • Understanding whether the recent financial crisis overall had a scarring effect or instead contributed to the cleansing of the economy.

 

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