Firm Dynamics and Job Creation in Turkey – Some Preliminary Results

This paper uses the Business Registers (BR) data set put together by the Turkish Statistical Office to examine patterns of firm entry, exit, employment growth, job creation and job destruction in Turkey over the period 2005-2012. In particular, we examine the role of small firms in total job creation. We find that distribution of employment has moved from very small (1-2 employees) and very young firms to larger and older firms over this period. Almost half of net job creation over the period has been generated by firms that have only one or two employees in the base year. This measurement is sensitive to how firm size is classified: when firms are classified according to average size rather than size in the base year, the share of very small firms in total net job creation appears smaller and the share of larger firms appears higher. While the share of very small firms (1-2 employees) in new entry is very high, 43 percent of very small existing firms and 48 percent of very small new entrants die within 5 years. Relative to existing firms, a higher proportion of new entrants grow into higher size groups. Econometric analysis shows that controlling for age, the role of firm size in job creation is negligible. By contrast, we find econometric evidence that controlling for firm size, younger firms create more jobs than older firms.