Uncertainty and the Employment Dynamics of Small and Large Businesses

IMF Working Papers, January 14, 2015

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Uncertainty and the Employment Dynamics of Small and Large Businesses

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Bibliographic details

• Authors: Vivek Ghosal, Yang Ye
• Published: January 14, 2015
• Series: IMF Working Papers
• DOI: https://doi.org/10.5089/9781475552515.001

Summary and Research Question

• Examines the impact of uncertainty on employment dynamics.
• Focus on differential effects across relatively smaller (small and entrepreneurial) and large businesses.
• Discusses implications for the framing of economic policy.

Measures and Methods

• Alternative measures of uncertainty constructed from:
  • Survey of professional forecasters.
  • Regression-based forecasting models for:
  • GDP growth
  • Inflation
  • S&P500 stock price index
  • Fuel prices
• Empirical approach centers on employment growth as the dependent variable.

Key Findings

• Greater uncertainty has a negative impact on growth of employment.
• Effects are primarily felt by relatively smaller businesses.
• Impact on large businesses is generally non-existent or weaker.
• Conclusion: To truly understand effects of uncertainty on employment dynamics, focus on relatively smaller and entrepreneurial businesses.

Policy Implications

• Economic policy framing should account for heterogeneity by firm size, with particular attention to small and entrepreneurial firms that are more sensitive to uncertainty.

Subject Tags and Keywords (as provided)

• Subject: Economic sectors, Employment, Fuel prices, Inflation, Labor, Prices, Small and medium enterprises
• Keywords: BLS fuel price indices, business group, costs firms face, dependent variable, employment, employment decision, entrepreneurship, financing-constraints, financing-constraints channel, fuel price uncertainty, Fuel prices, Global, Inflation, inflation rate, price index, real GDP, real-options, representative firm, size class, Small and medium enterprises, small businesses, stock price index, uncertainty, uncertainty measure, venture capital, WP

Content in this bundle

• _wp1504 — Appendix A: Selected Empirical Findings on the Impact of Uncertainty
  • _wp1504 — Appendix A: Selected Empirical Findings on the Impact of Uncertainty (Markdown version)
  • _wp1504 — Appendix A: Selected Empirical Findings on the Impact of Uncertainty (PDF)