csae2013 Tunisia NJC .pdf



Nom original: csae2013 -Tunisia-NJC.pdfTitre: Private Sector Paralysis Firm Dynamics in TunisiaAuteur: Bob Rijkers

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Structural Stagnation
Firm Level Evidence on Job Creation in Tunisia

CSAE Conference 2013

Hassen Arouri
&
Bob Rijkers

Introduction
• Which firms create the most jobs?

• Size , Age, Event,
• Performance,

Job creation
(unemployment, economic
policy)

• Popular notion: "Small firms create the most jobs”
– Is this true in developing countries?
– Across sectors ?

• We revisit these questions in Tunisia :





exemplary of developing countries
government pursued an active industrial policy
the forefront of the Arab Spring
Census database of All private legal units

2

Overview
Introduction

• Part I: Tunisian Business Register
• Part II: Descriptive Statistics
• Part III: Econometric model and Results
Conclusion
3

Part I: Tunisian Business Register
Data Assembly and Features

4

Data
• Tunisian Business register(1996-2010)
– Panel of all registered private firms in Tunisia – except
agriculture
– Employer and self-employed; on shore and off shore; with
or without accounts, …
+ Data on Turnover and Profits from the Ministry of Finance
(2001-2010)
– Data missing for 40% of firms
+ Customs data on importing (2000-2009) and exporting (20002010)
– By firm, product and destination
5

Data Features
• Measuring Employment
– TBR does not cover all unpaid workers
+ We assume all firms employ one unpaid workers
– Coverd only registred employement (70%)
• underreporting seems to be confined to particular sectors (construction)

• False active
– 11% of the one person firms are false active
+ Determinist model based in active signals (salaries, turnover,… )

• Performance indicator (productivity and profitibility)
+ exclude firms without accounts and volatile units

6

Part II: Descriptive Statistics
5 stylized facts

7

Stylized Fact #1:
Tunisia’ private sector is skewed towards small scale activities
Firm-Size and Employment Distributions
(All Formal Private Firms except for co-operatives)
86%

% of employment

29%

% of firms

12%
13%

37%
20%

2%

0%

One-person
Micro (2-10 employees)
Small (11-100 employees)
Large (>100 employees)

8

Stylized Fact #2:
The Firm Size Distribution has become Progressively More
Skewed Towards Small-Scale Production
Evolution of the Firm Size Distribution 1996-2010
100%
98%
96%

Share of Firms (by firm size)

>=1000
94%

[200,999]
[100,199]

92%

[50,99]
[49,50]

90%

[10.49]
88%

[5,9]
[3,4]

86%

2
1

84%
82%

80%
1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

9

Stylized Fact #3:
Aggregate Job Creation was Disappointing
and mostly driven by Entry
Net Job Creation in Tunisia 1997-2010
120000
100000

Number of Jobs Created

80000
60000
40000
20000
0
-20000

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

-40000
-60000
-80000
-100000

NJC

JC Entry

JD exit

NJC without entry

NJC Continuing firms

On average : entry : + 57000, Exit : - 41000
and Continuing : + 23000

10

Stylized Fact #4:
Start-Up Self Employment Was the Key Driver
of Employment Growth
500000
400000
300000
200000
100000

[200,999]

Size

[50,99]

[10.49]

-100000

[3,4]

1

0

- 2 out of every 5 net new jobs were in self employment
- On average, firms that are older than 4 years shed labour
11

Stylized Fact #5:
Mobility is Extremely Low – Even in the Long Run
EMPLOYMENT TRANSITIONS
Short-Run: Annual Transitions (1996-2010)
Size in year t
1
[2-5]
[5,9]
[10.49]
[49,99]
[100,999]
>=1000

Size in year t+1
Exit
1
6.51
91.98
8.16
7.82
6.91
1.30
3.79
0.90
2.72
0.61
1.83
0.37
1.59
0.00

Size in 1996
1
[2-5]
[5,9]
[10.49]
[49,99]
[100,999]
>=1000

Size in 2010
Exit
1
59.25
37.81
53.36
15.59
53.69
2.59
46.54
2.18
43.42
1.77
38.11
1.17
18.75
0.00

[2-5]
[5,9]
[10.49]
1.34
0.10
0.06
79.61
3.93
0.44
14.18
68.75
8.71
1.80
8.76
80.51
0.43
0.50
16.04
0.21
0.26
1.91
0.14
0.14
0.14
Long-Run: 1996-2010

[49,99]
[100,999]
0.01
0.01
0.02
0.01
0.10
0.04
3.73
0.49
67.84
11.84
8.31
86.56
0.14
11.56

>=1000
0.00
0.00
0.00
0.00
0.01
0.56
86.27

[2-5]
2.45
25.44
14.64
5.71
2.65
1.93
0.00

[49,99]
[100,999]
0.01
0.02
0.05
0.07
0.53
0.27
4.92
2.02
19.16
12.18
10.30
38.44
0.00
37.50

>=1000
0.00
0.00
0.01
0.02
0.00
1.51
40.63 12

[5,9]
0.31
4.29
18.07
9.69
1.87
1.17
0.00

[10.49]
0.15
1.21
10.21
28.93
18.96
7.37
3.13

Part III
Econometric Strategy and Results

13

Econometric Framework
• Specification

where
• Advantages of g (DHS measure):
– allows for an integrated treatment of Entry (g=2) and exit (g=-2)
– Symmetric
– If weighted appropriately – can be interpreted as a conditional job flow

• Size Classification: Base (e.g. Last year’s) Size vs Average Size:
– Base Size: Vulnerable to measurement error
– Average Size: less vulnerable to measurement error but understates the
contribution of very small and very large firms.

14

NJC and Size
Large Firms Create More Jobs (conditional on their age)
Net Job Creation by Firm Size
All Firms '97-'10

0,2

Size (Average)

0,15
Size(Base)
Size (Average) + Age

0,1

Size (Base) + Age
0,05

0
1

2

[3,4]

[5,9]

[10.49]

[49,50]

[50,99]

[100,199]

[200,999]

-0,05

-0,1

-0,15

15

NJC and small firms
Small Firms Are More Likely to Die….
Net Job Creation Due to Firm Exit by Firm Size
1997-2010

0
1

2

[3,4]

[5,9]

[10.49]

[49,50]

[50,99]

[100,199] [200,999]

-0,02
-0,04
-0,06

Size (Average)
Size(Base)
Size (Average) + Age
Size (Base) + Age

-0,08
-0,1
-0,12

…. And Less Likely To Create Jobs Even if They Survive
Net Job Creation Continuing Firms by Firm Size
1997 -2010

0,1
0,05
0
1

2

[3,4]

[5,9]

[10.49]

[49,50]

[50,99]

[100,199] [200,999]

-0,05
-0,1
-0,15

Size (Average)
Size (Average) + Age

Size(Base)
Size (Base) + Age

16

NJC and Age
Young Firms Grow the Fastest on Average
But are more likely to die
0,2

Net Job Creation Continuing Firms by Firm Age
1997-2010

0,15

Age (avg size emp weights)
Age (base size emp weights)
Age + Size (average)
Age + Size (Base)

0,1
0,05
0
2

3

4

5

6

7

8

9

10

[11-15]

[15-20]

-0,05

-0,1
-0,15

Net Job Creation Due to Firm Exit by Firm Age
1997-2010

0

-0,02

2

3

4

5

6

7

8

9

10

[11-15]

[15-20]

[21-30]

-0,04
-0,06
-0,08
-0,1
-0,12
-0,14

Age (avg size emp weights)
Age (base size emp weights)
Age + Size (average)
Age + Size (Base)

17

NJC and Performance
The process of Creative Destruction is Attenuated
NJC 2007-2010
All firms employing wage workers only
Average Size Classification
1
2
3

4

5

Productivity and Profitability
Productivity

0.0057

Profitability
Size and age dummies
Activity Dummies
Year Dummies
N
R2

No
Yes
Yes
129516
0.0068

0.0288
0.0009
No
Yes
Yes
129516
0.0092

Yes
Yes
Yes
129516
0.3395

0.0154
0.0015
Yes
Yes
Yes

0.0013
Yes
Yes
Yes

129516
0.3432

129516
0.3440

• Employment creation is only weakly
correlated with productivity and profitability
18

NJC and International Trade
Firms linked into Global Value Chains Create the Most
Jobs
Net Job Creation and International Orientation (2005-2009)
OLS Regressions
Dependent Variable: DHS growth measure
Average Size
Offshore

1

2

3

4

5

6

0.074

0.021

-0.054

-0.050

-0.095

-0.055

0.115

0.046

0.052

0.046

0.046

0.046

0.006

-0.042

0.091

0.080

Foreign
Exporter

Importer
Exporter*Importer

0.053

Firm Size Dummies

No

No

Yes

Yes

Yes

Yes

Firm Age Dummies

No

No

Yes

Yes

Yes

Yes

Year Dummies

Yes

Yes

Yes

Yes

Yes

Yes

Activity Dummies

Yes

Yes

Yes

Yes

Yes

Yes

• Offshore firms , Foreign owned firms and Importers
create more jobs
19

Conclusions
• The Tunisian private sector is characterized by :





Small scale activities and production
The young firms create the most new jobs
A “stagnate or out” dynamic = limited mobility
A severely attenuated creative destruction process

• Urgent Reforms need to be undertaken
– Business climate : corruption, bureaucracy, taxation,
control, …, Information system,
– Promotion system : entry of large, productive units,
removing constraints to incumbent growth, …
–…
20

Thank you !

21


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