DO SMALL BUSINESSES CREATE MORE JOBS? NEW EVIDENCE FROM THE UNITED STATES FROM THE STATISTICS OF U.S BUSINESSES

Abstract

This paper attempts to determine whether SMEs have a higher rate of job creation than larger companies. This subject has been a contentious topic of research for many years, with numerous studies producing conflicting results. This paper also looks into the role of government in supporting and promoting SMEs, due to the belief that they drive job creation. This paper utilises data from the Statistics of U.S. Businesses (SUSB) to extend Neumark et al.’s examination of the argument surrounding the importance of small businesses to job creation (Birch, 1987; Davis, Haltiwanger & Schuh, 1996). Evidence for both the overall economy and individual sectors is evaluated using the SUSB data. The findings show that small businesses typically do not create more jobs than larger firms. Furthermore, in the time period under consideration, the association between establishment size and net job creation appears to be minimal, and is therefore insignificant within the scope of this study. However, the result conflicts with Neumark et al.’s findings, which raises questions about the sensitivity of results to diverse datasets rather than methodologies alone.