Industrial structure and economic stability

Abstract

Motivated by prior results predicting contrasting linkages between industrial structure and economic stability, we present exploratory empirical evidence on this important issue. Consistent with the turnover hypothesis, we find that employment grew more steadily where business establishments in all sectors were larger, suggesting an offsetting benefit to the first-moment costs of establishment size identified by previous research. Consistent with the job-matching hypothesis, we find that employment grew more steadily where more establishments per capita operated in all sectors. Similar but less consistent results were also found regarding the stability of income growth.