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The Impact of New Firm Formation on Regional Employment Change by Industry over Time and Space (in Korean)

Author

Listed:
  • Sungchul Cho

    (Korea Research Institute for Human Settlements)

  • Ki-Ho Kim

    (Economic Research Institute, The Bank of Korea)

Abstract

While it is widely assumed that a high level of new firm formation in a region contributes to employment growth, the empirical evidence concerning the long-term impacts that become effective only after a substantially long time lag is still elusive. Drawing from a panel dataset that covers 234 administrative districts (Si-Gun-Gu) over the 2004-2016 period, we investigate the long-term employment effects of new firm formation. The relationship between regional employment change and start-up rate is analyzed using Almon polynomial distributed lags model with fixed effects. Our findings show that the effects of new firm formation on employment growth persists over a long time-period of up to eleven years. We found the magnitude of the overall effects varies substantially between industrial sectors. The entry of manufacturing firms has stronger positive employment effects compared to that of service firms. It is also found that the entry of startups in knowledge intensive as well as in innovative industries? such as high-tech manufacturing or professional business service ? has a relatively stronger employment effect. On the other hand, the impacts of new firm formation in social or personal service industries were found to be negative.

Suggested Citation

  • Sungchul Cho & Ki-Ho Kim, 2018. "The Impact of New Firm Formation on Regional Employment Change by Industry over Time and Space (in Korean)," Working Papers 2018-35, Economic Research Institute, Bank of Korea.
    • Handle: RePEc:bok:wpaper:1835
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    More about this item

    Keywords

    New Firm Formation; Emplyoment Effects; Polynomial Distributed Lags Model; Panel Analysis;
    All these keywords.

    JEL classification:

    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity

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