This paper measures the relation between job flows and stablishment size applying econometric techniques best suited for analysing the dynamics of large cross-section. Using a balanced panel from the Mexican Manufacturing sector, it shows that, in line with cross-country evidence, initially small firms create proportionally more jobs than large firms. Since these results suffer from regression toward the mean, the paper applies an alternative technique and it does not find long-run tendency of small establishment to converge toward the mean. Furthermore, it shows how cross-sectional dynamics varies across industries and how it is linked to gross and net flows in each sector. We observe convergence to the mean in relatively stable sectors and asymmetric dynamic behaviour between expanding and declining industries.
Author(s): Pietro Garibaldi (IMF, Washington)