Job Flows in Italian SMEs: A Longitudinal Analysis of Growth, Size and Age

The paper proposes an empirical investigation of job flows for continuing manufacturing firms in Italy from 1996 to 2004 using high quality data on work forces and other characteristics of the firm. The magnitude of the job flows for small and medium-sized limited liability companies in Italy is lower than what observed in Anglo-Saxon countries, but it is still in line with evidence for firms in the Euro area. Second, the magnitude of job flows significantly shrunk in the aftermath of the economic downturn in 2001. Firms fared worse than in the late nineties and the labour market became less efficient in allocating job flows. Third, gross job creation and gross job destruction decrease as firm get larger, but when added to compute an indicator of net employment growth, size does not seem to affect firms’ expansion. On the contrary, age significantly hinges on the growth opportunities of small and medium-sized enterprises. The econometric analysis corroborates the major findings of our descriptive investigation referring to the role of size and age. In particular, it shows that classification methods used to define size classes strongly influence the estimated relationship between growth and size industrial regimes play a role in shaping job flows. Our result show that firms in supplier dominated industries fared significantly lower than enterprises in other sectors during the sample period.