shows that elsewhere in most developed and developing economies, SMEs employ the largest proportion of the workforce.

In reality, the findings on where people are employed have showed marked sensitivity to the cutoff and method for defining firm-size categories. Just a handful of studies from the US make this clear. As noted above, Davis et al (1996) show that the base-size definition makes a substantial difference. They utilize manufacturing census data for the US spanning from 1972 to 1988 to illustrate the point. When size is defined using initial employment, large manufacturing establishments (over 250 employees) employ about 57% of the total private sector workforce; this share moves to about 60% when average employment size is used to categorize firms. For a size cutoff of 500 employees, large firms account for about 40% of employment (using the average size this figure is 42%). Neumark et al (2011) expand this work, using the US National Establishment Time Series (NEST) data from 1992 to 2001, covering manufacturing and services sector firms. In fact, contradicting the findings of Davis et al, they report that firms with fewer than 250 workers employ over half of the total private sector workforce, regardless of whether size is determined using initial or average employment.<sup>9</sup> Refuting this, Haltiwanger et al. (2013), employ a dataset<sup>10</sup> that covers all private sector establishments with at least one paid employee, from 1995 to 2005, finding that large firms are in fact the biggest employers of non-farm private sector labor in the US. In particular, they report that firms with 500 or more employees constitute roughly half of the total stock of employment in the US, with large and mature firms representing the single-largest plurality.

However, studies from other developed countries are less ambiguous on the role of SMEs as the major source of employment. Lawless (2014), for instance, uses panel data from Ireland (from 1972 to 2010) showing once again that the size cutoff matters. Firms with at least 50 employees account for less than one third of total employment while those with 250 or fewer employees constitute approximately two-thirds of the total workforce. Further, in a comprehensive study of census data from 18 (mostly OECD) countries, Criscuolo et al (2014) find that SMEs, defined as those with 250 or fewer employees, account for over 50% of total employment in all 18 countries except the US. In fact, in six of the countries (Brazil, Japan, Italy, New Zealand, Portugal, and Spain) firms with fewer than 50 employees account for the majority of employment. Using registry data from the UK (1997 to 2008), Hijzen et al (2010) report that firms with 250 or more employees account for about 53% of the total employment, although the contribution falls to approximately 42% when size is measured using average employment. Using manufacturing census data<sup>11</sup> from Norway (1976 to 1986), Klette and Mathiassen (1996) show that firms with 150 or fewer employees (regardless of whether firm size is

> 9 Using a size cutoff of 100 employees, the proportion accounted for by SMEs is 44%

> 10 The US census Bureau’s Longitudinal Business Database (LBD), updated and improved version of the data used by Davis et al (1996).

> 11 Excluding firms where the owner is the only employee.

7