can be said to lead to more private sector jobs; if however, firms with more sales employ fewer workers and are not adding jobs at pace, it can be a sign of underemployment and job-less growth.

This paper takes advantage of firm-level data (the World Bank Enterprise Surveys) collected in 2013 on registered — i.e., formal — firms operating in the Ghanaian industrial and service sectors, to examine the characteristics of job-creating firms and analyze the relative quality of these jobs in terms of productivity and firms’ average wage bills. The analysis looks at the relationship between job creation (using recall data) and labor productivity by focusing on firms’ main characteristics such as age, size, sector, location, exporting status, foreign participation in ownership, managerial capacity, and workforce education. The aim is to provide evidence on whether factor and product markets are working efficiently by allocating jobs towards more productive firms, and whether workers are benefiting from productivity gains in their sectors in terms of higher wages.

Results from the analysis show that larger and older firms account for the majority of workers and that formal job density is highest in the Accra region, including the Accra Metropolitan Area (AMA) and Tema. In addition, large firms pay higher wages on average, are more productive, and account for most of the aggregate net formal job creation between 2010 and 2012. In developed countries, there is evidence that businesses start small and if they survive they grow as they age (Hsieh and Klenow, 2014). In emerging economies, though, this research has found that plants grow at a much lower rate compared to the United States (especially at younger ages); yet older, formal manufacturing plants are larger than their younger counterparts. Growing evidence has suggested that compared to developed countries, firms in developing countries tend to grow much slower over time due to poor marketing functioning that constrains firms to invest and expand. A large portion of this differential, however, is largely explained due to the firm size at the beginning of their operations (Ayyagari et al 2015). Understanding the firm life cycle is crucial to design policies that will boost productivity and employment while reducing inequality.

In Ghana, firms grow over time conditional on firms’ survival between firms’ birth and present,<sup>3</sup> however growth is concentrated in a subset of firms. While the average firm has more or less doubled its size over its lifecycle, the median firm is roughly the same size as it was at birth (a start-up size of around 7 employees), an indication that only some firms are growing and doing so substantially. Firms that start as micro (with less than 4 employees) are those that see the largest relative scaling later in their lifecycle, a factor of 7.5, to a size that is still smaller than 20 full-time employees. By contrast, firms that start large, say with over 160 employees at inception, appear to roughly double their size early on, then stabilize,

> 3 There is an incumbency bias where firms that are unproductive (and often smaller) have exited the market. Since the ES only measures those firms that have survived, the lifecycle likely overestimates the firms’ true employment growth.

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