Twenty years of job flows in an emerging country

In a market economy, firms are continuously exposed to economic shocks that affect their performance and results. In response to these shocks, firms react by reallocating their productive factors, such as capital and labor, to more productive uses. We estimate the job flows over a twenty-year period in Uruguay, exploring firm and worker characteristics. We use panel data from social security administrative records that match employers and employees in formal firms between 1996 and 2015. Job flow levels and their cycles are consistent with international evidence. Entry and exit of firms from the market play an important role, explaining about 30% of the total number of jobs created and destroyed for the whole period with high heterogeneity across industries, firm age, and firm size. In particular, the smallest firms are not as relevant in explaining net growth as political and popular beliefs would suggest, and it is start-ups that have the main role in job creation in Uruguay. Despite representing only 5% of total employment, they created more than one-quarter of new jobs and maintained this role in a fully saturated regression. Among worker characteristics, we found no differences in job flows by gender, but female workers gain participation in the period; there are bigger flow rates among workers under 25 and workers in the first and third wage terciles.