Firm births and employment change in the British counties: 1981-89

This paper explores the relationship between firm formation and net employment change at the country level of Britain during the 1980s. An augmented factor-demand model is specified and estimated across the 64 countries of Britain. The results offer support for the view that firm formation is strongly associated with net employment change in British countries. Moreover, when allowance is made for feedback effects due to the estimated simultaneity between new starts and net employment the impact of firm formation on estimated job change is even greater.