Declining Business Dynamism in Belgium

Using 30 years of data from all for-profit firms incorporated in Belgium, we show that business dynamism and entrepreneurship have been declining over recent decades. This decline set in around the year 2000 following a decade of declining start-up rates. We also observe a decreasing share of young firms that become high-growth firms and more importantly a declining propensity for small (not necessarily young) firms to experience fast growth. Interestingly, a similar decline in business dynamism occurred in the USA, where firms face a far less rigid institutional environment than in Belgium. These remarkable similarities suggest that global trends rather than country-specific changes are at the basis of this evolution. We show evidence that points to the role of ICT intensity in explaining the secular decline in business dynamism

Where has the Belgian Business Dynamism gone?

We build on Decker et al. (2016) who show that business dynamism and entrepreneurship in the U.S. have declined over recent decades and that the characteristics of this decline changed around 2000. Since 2000 the U.S. decline in dynamism has been accompanied by a decline in high-growth, young firms. Using 30 years of data from all Belgian private firms, we now offer evidence that Belgium, a far more rigid economy than the U.S., experienced a similar decline in dynamism. Furthermore, the decline set in around 2000 as well. We attribute this not only to the declining share of young firms to become high-growth firms, but more importantly also to the declining propensity for small firms to experience fast growth. We do not yet know what caused this decline. Since there are remarkable similarities between Belgium and the U.S. with respect to the secular decline in business dynamism, global trends rather than country specific changes are most likely to be at the basis of this evolution.status: Published onlin

Declining Business Dynamism

We build on Decker et al. (2016) who show that business dynamism and entrepreneurship in the U.S. have declined over recent decades and that the characteristics of this decline changed around 2000. Since 2000 the U.S. decline in dynamism has been accompanied by a decline in high-growth, young firms. Using 30 years of data from all for-profit firms incorporated in Belgium, we now offer evidence that Belgium, a far more rigid economy than the U.S., experienced a similar decline in dynamism. Furthermore, the decline set in around 2000 as well. We attribute this not only to the declining share of young firms that become high-growth firms, but more importantly also to the declining propensity for small (not necessarily young) firms to experience fast growth. We do not yet know what caused this decline. Since there are remarkable similarities between Belgium and the U.S. with respect to the secular decline in business dynamism, global trends rather than country specific changes are most likely to be at the basis of this evolution. A possible global trend causing dynamism to decline, is the ICT revolution that started the second half of the ’90s. We find preliminary indications that industries with higher ICT intensity have experienced a dynamism trend change during that same period and show a steeper dynamism decline.status: publishe

Een analyse van de impact van loonkost op werkgelegenheid en concurrentiekracht in Belgische Ondernemingen

Onder de regering Michel I werden een aantal maatregelen genomen ter bevordering van de concurrentiekracht: de indexsprong, de taxshift en de aanpassing van de wet op de loonnorm. Sinds het aantreden van de regering is het aantal jobs ook ontegensprekelijk sterk gestegen, met 230.000 banen. En hoewel de Belgische loonkost per uur opmerkelijk hoger blijft dan de loonkost van onze buurlanden, kunnen we de laatste jaren een duidelijke verbetering optekenen. Professor Joep Konings en Gert Bijnens becijferden het effect van deze beleidsmaatregelen op de tewerkstelling voor de periode 2014 – 2018. Van de 230.000 jobs die werden gecreëerd tussen het derde kwartaal van 2014 en het derde kwartaal van 2018, hebben 133.000 jobs betrekking op werknemers in dienstverband in de private sector. Van deze 133.000 jobs is 55% (73.000 jobs) te danken aan de genomen maatregelen gespreid over de taxshift (35.000 jobs), de indexsprong (27.000 jobs) en aan de aanpassing van de wet op de loonnorm (11.000 jobs). De auteurs komen tot deze bevindingen door gebruik te maken van gedetailleerde ondernemingscijfers en nieuwe 'machine-learning-technieken'. Voor 2019 verwachten de auteurs nog een bijkomende positieve impact van 8.000 jobs dankzij de taxshift, hetgeen de totale impact van de loonkostmaatregelen op ongeveer 80.000 jobs brengt. Nog een kleine nuance: de cijfers houden geen rekening met de eventuele impact van de maatregelen op werknemers in de welzijnssector, noch op zelfstandigen.status: publishe

Het veranderende ondernemingslandschap: feiten en een kader voor industrieel beleid

nrpages: 8status: publishe

An Enterprise Map of Belgium

“An enterprise map of Belgium,1 a guide for industrial policy” uses a unique dataset of approx. 305,000 Belgian enterprises2 observed during the period 1997-2013. We study the evolution and dynamics of these firms and develop a framework for industrial policy. The framework can serve as a guide for policymakers to decide which industries to actively develop. Studying the firm data, we observe manufacturing remains an important pillar of our economy, though its share in private sector employment and (less outspoken) its share in added value is shrinking. Jobs are lost in the manufacturing industry and created in services industries. Within the services industry both knowledge intensive services (KIS) and less knowledge intensive services (LKIS) experience similar growth percentage-wise. In absolute numbers, however, the less knowledge intensive services showed an increase in employment of 3-to-1 compared to the increase in employment of the knowledge intensive services during 1997-2013. The increase in LKIS is to a large extend driven by the system of “service vouchers”, a system of government wage subsidies targeted at domestic services. On average, real remuneration per hour increased over the period, but the underlying re-allocation between industries shows a large heterogeneity with different effect on different groups: higher paying manufacturing jobs are predominantly replaced by lower paying services jobs. Also in Belgium, there is an ongoing trend of job-polarisation between higher wage jobs found in knowledge intensive services and (what is left of) manufacturing on the one hand and lower wage jobs found in less knowledge intensive services (distribution and service vouchers related sectors) on the other hand. Geography wise, we also find diverging trends. Whilst the less knowledge intensive services experience similar growth across counties (arrondissements), manufacturing and knowledge intensive services do not. This might also lead to a geographical polarisation between different areas. One potential driver of the these trends is further scrutinised, i.e. the incidence of high growth firms. We know that a limited number of high growth firms play an essential part in job creation and reallocation. We find a clear decline in the amount of high growth firms. This could lead to a loss of dynamism and entrepreneurship in our economy. Policy makers needn’t necessarily remain bystanders as these trends emerge. Recent evidence has shown that industrial policy can in fact result in higher economic performance, provided it is well designed. We develop a framework for an industrial policy based on the level of innovation and specialisation in different manufacturing industries. We find a significant potential for the pharma and transport & automotive industry. The textiles & apparel industry and electronics and electrical equipment manufacturing could be further developed into future key industries. They will need, however, increased levels of innovation and further specialisation.nrpages: 41status: publishe

De causale impact van de Waarborgregeling

Deze studie brengt de effecten van de Waarborgregeling op investeringen en tewerkstelling in kaart. We vergelijken ondernemingen met waarborg met ondernemingen zonder waarborg. Als dusdanig is dit een update van de reeds in 2014 uitgevoerde studie Breemersch et al. (2014) “Beleidsrapport STORE-B-14-002: Economische analyse van de waarborgregeling”. In vergelijking met de voorgaande studie beschikken we over aanzienlijk meer waarnemingen van gewaarborgde ondernemingen. Dit verbetert de accuraatheid van de schattingen.status: publishe

Declining business dynamism and information technology

Evidence from the US indicates that business dynamism is declining, and that this affects overall productivity growth. This column explores business dynamism in Belgium between 1985 and 2014. The results show remarkable similarities to those from the US, suggesting that these changes are likely due to global trends such as the rise of information and communication technology.status: Published onlin

The impact of electricity prices on jobs and investment in the Belgian manufacturing industry

Belgium is losing manufacturing jobs and it is losing these jobs at a faster pace compared to most other European countries. Whilst the impact of labour costs on the competitiveness of our industry is much debated and documented, the impact of the price of electricity remains unquantified. Using data of 10 European, highly industrialised countries, we estimate the impact of electricity prices on jobs and investment in Belgian manufacturing. We estimate that the elasticity of employment with respect to the electricity price is on average -0.30 and the elasticity of investment equals on average - 0.55. This means that a drop in the price of electricity of 1% would lead, holding all other things equal, to 0.30% extra manufacturing jobs and 0.55% extra manufacturing investment. Our findings are robust to different calculation methods. Others have estimated that electricity prices in Belgium are 10%-35% higher than in the neighbouring countries. Combining this information with the estimated elasticities, we calculate a price drop of 10% of the Belgian electricity price would lead within the manufacturing industry to an increase of 12,000 full-time jobs and an increase of €550 Million in yearly investment. These numbers are likely to be an underestimation of the impact. We take a conservative stance on the price handicap and Belgium has historically specialised in the most electricity intensive sectors. Furthermore, our approach does not quantify spillovers to other manufacturing nor services industries.status: publishe