The following HTML text is provided to enhance online
readability. Many aspects of typography translate only awkwardly to HTML.
Please use the page image
as the authoritative form to ensure accuracy.
Understanding Business Dynamics: An Integrated Data System for America’s Future
growth, and exit of business units and (2) the employment flows generated by these expansions and contractions and births and deaths of employers (Davis, Haltiwanger, and Schuh, 1996). The business dynamics literature generally has measured job creation and job destruction by tracking changes in employment in individual establishments over time. Data series on job creation and destruction have been constructed by industry, region, and characteristics of producers, such as size and age. One outgrowth of this line of research in the United States has been the development of the Business Employment Dynamics program at BLS (Spletzer et al., 2004) and the Quarterly Workforce Indicators (QWI), a data series published since 2003 by the Census Bureau that offers detailed information on local labor market dynamics. Each of these programs provides timely information using QCEW data on job creation in new and growing establishments and job destruction in exiting and shrinking establishments. The QWI data series from the Census Bureau also provides measures of worker hires and separations classified by worker characteristics, such as gender and age.
A second approach to defining business units takes an industrial organization perspective and focuses on measuring producer participation in a given market or industry. In this approach, participation in a specific product market by a firm is key to defining the business unit. The specific market may be defined along a range of dimensions including, but not necessarily limited to, industry and geography. The market may correspond to an industry or product that is national (or international) in scope (e.g., semiconductors), or it may be much more localized, as would be the case for, say, the services of most restaurants. Under this definition, a firm or an establishment may produce for a single market or for multiple markets, and it is fundamental to be able to measure a firm’s participation in each one.
The business unit described in a market-oriented approach may, in some cases, represent a nondiversified firm that operates in a single market. Here, the legal definition of the firm corresponds to our notion of the business unit, and the standard administrative or tax entity is an adequate statistical unit. Examples include a manufacturing firm operating at a single location producing a specialized good, or a service provider (like a dentist) that sells in a local market. In both cases, these are single establishment firms selling in a single market. However, many firms produce in multiple industries and operate across many distinct geographic markets. The link, in these cases, between the business unit and the firm is not one-to-one, and thus the firm definition is inadequate for measuring participation in markets. It is important to recognize that, while such multimarket firms may be relatively small in number compared with single-market firms, they typically represent a substantial fraction of economic activity because of their large sizes.
From a cross-sectional perspective, there are a number of key charac-