# **V. Discussion and Conclusion**

A comprehensive comparison of the existing evidence on relative contributions to employment stock and job creation is complicated by the diversity of data used in various studies. Nevertheless, a pattern emerges from reviewing the literature. In terms of the static snapshot of where people are employed, SMEs are the largest employers, employing in most cases over half of the total labor force in the non-agricultural and nonfinancial private sector. What is more, this patterns holds both for developing and developed countries, although the US is somewhat of an exception in that large firms appear to be the largest employers.

The evidence on the dynamic aspect of which types of firms create jobs at a faster rate is a bit scattered, particularly for developing countries and as it relates to firm size. Studies on developed economies increasingly show that firm size is less of an important variable, but rather employment creation is driven by a small set of young and fast-growing firms pointing to the importance of firm age rather than size. For developing countries, however, there are generally few studies that use suitable dataset to satisfactorily answer this question. The limited studies that are available provide mixed results regarding size and job creation, and what is more, these are sensitive to the definitions and methods that are used. In terms of firm age, by contrast, there appears to be a consensus in that older firms are the largest employers, but the younger firms are the ones that create jobs at a faster rate. Taken together, these findings indicate that policy aimed at fostering job creation should carefully consider how firm size is defined.

We also illustrate how sensitive the results can be, focusing on developing economies and using the World Bank’s Enterprise Surveys data. Three salient points emerge. The first is one of interpretation based on different specifications. As noted above, the use of OLS results such as those employed by ADM provides a best approximation of establishment-level activity and thus provides a picture of each establishment’s adding or shedding of jobs. Our replication of their topline results then clearly confirms that young establishments and SMEs are the most dynamic in terms of adding jobs. On net, these are also the fastest growing firms when considering only establishments that added to their workforce. By contrast, employment-weighted measures provide a relative measure of establishments based on their underlying share of the stock of employment and thus illuminate the relative dynamism of sectors of the economy. Here, in line with findings from HJM, we find that establishment age, not size, predominates. As we have shown, this distinction matters as results are sensitive to the use of either specification. This finding has certain policy-making relevance as well. The latter method indicates which establishments are themselves the most dynamic and so may be of interest for interventions targeted toward fast-growing recipients; the former, by contrast, paints such policies in broader brushstrokes and may be especially relevant for sector-level actions.

Secondly, despite these distinctions for findings regarding _net_ employment growth, we find consistent and robust results for the role of establishment size and age in terms of gross job creation. That is, where 24