establishments are growing, they tend to be smaller and younger. From these results, we also cannot say anything about the quality of these jobs: if new jobs added are higher-quality than the ones that are shed, welfare gains are likely to be positive. By contrast, we find that results for establishments with job contraction are particularly sensitive to researchers’ choice and specifications, indicating that careful consideration should be paid to the effects of job contraction as well. We show that the use of initial or average establishment size has particular implications for results obtained for job-contracting establishments. This not only underlines the need to consider in particular those establishments for analysis, but also highlights a future need for research into establishment exit and robust panels, both of which can act as complements to periodic survey databases such as the ES.

A last point of discussion, then, is perhaps the most pertinent: the revealed sensitivity of job dynamics estimates to the means and thresholds used to define SMEs should give researchers and policy makers occasion to consider the use of those definitions. Clear implications have been shown following the analysis of Davis et al. of regression-to-the-mean/fallacy effects, indicating the appropriateness of period-average definitions. Their initial study as well as many subsequent ones relies on longitudinal data – thus with each firm being classified between _t_ and _t-1_ – and it is not clear what these effects will be using a _t-d_ recall variable (in addition to potential measurement error introduced by using recall questions). Moreover, in actuality surveyed establishments do not report their average employment but rather at specific moments in time. Nor do practitioners know an establishment’s future size when implementing policy interventions that are themselves designed to foster growth. Discussions of the relevance of policy interventions will need to be based on directly applicable definitions. What is more, it is precisely the business cycle shocks that result in reversion effects – in reality the quick addition or shedding of jobs – that policy makers may be interested in addressing.

Does this then undermine a policy focus on SMEs? We find evidence that establishment age matters and the size of an establishment also plays an important role, a role that is sensitive to the definition used by researchers. Moreover, we find that this sensitivity comes from the consideration of job contraction, and that this picture is incomplete without the consideration of exit effects. While this is a limitation, it highlights the need for robust and complete panels, using further data collection efforts and techniques – for instance the construction of “synthetic” panels to account for non-response. Several previous studies highlight that the likelihood of exit is higher among SMEs; rather than removing the impetus for policies targeting those establishments, this finding may indicate a need for interventions that enable smaller firms to grow as they would in the face of, for example, lower business environment obstacles. This is another area of potential research.

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