Determinants of Employment Growth of Firms in Korea

초록

This paper studies the determinants of employment growth using firm-level data from 2006 to 2020. We examine whether there exist any differences between large and small and medium-sized firms in determining their employment changes. We find that large firms tend to increase the number workers more than small and medium-sized firms, and firms hire more workers as they expand in size. Our empirical results are robust to different measures of firm size. The investment growth rate has a positive impact on the employment growth of firms. It also shows that small and medium-sized firms have a higher share of temporary workers, suggesting that they might expand and decrease the number of employees by hiring and discharging temporary workers in response to economic shocks. This result implies that small and medium-sized firms rapidly adjust the number of workers in times of crisis or recession to reduce labor costs, and this employment adjustment might result in sudden drops and rises in unemployment in the country. This suggests that policy makers need to design a policy to keep these firms from quickly reducing the number of workers with temporary workers to avoid fluctuations in employment.

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