The Link between Firm Births and Job Creation: Is There a Upas Tree Effect?

Abstract

New firm startups and employment changes in Great Britain are examined as a result of general interest in the fact that, for more than 20 years, national and subnational governments there have tried to increase business startup rates to improve wealth and job creation. It is believed that there is a relationship between the extent that a geographical area is entrepreneurial and the extent that it is economically successful. Garofoli's arguments favoring a labor market approach are used as the basis for the study. Data are spatial aggregations of the NUTS3 regions in Great Britain—county level in England and Wales and local authority region level in Scotland. Employment data is from the Census of Employment and the Annual Employment Survey and provided by Nomis. Value Added Tax Registration was provided by the Small Business Service. Population and area statistics were taken from the Office of National Statistics in London. Wage statistics were taken from the New Earnings Survey Panel Data-set of the Office of National Statistics. Conclusions indicated no evidence that changes in British new firm formation rates from 1980 to 1983 explained changes in employment from 1984 to 1991. Also, startups had a greater impact on job creation in the 1990s than the 1980s, even though raising the startup rate was the key policy objective in the 1980s.(JSD)

Keywords: Experimental/primary research, Job creation, Economic policies, Development policies, Startups, Employment rates