Employment Growth by Firm Size During the Recent Crisis in Italy: A Multifactor Partitioning Analysis

The effects on employment growth in firms, grouped by size class, of the economic crisis that began in 2008 are analysed using multifactor partitioning (MFP). Italy’s employment growth is decomposed into four explanatory factors: the stage in the business cycle; the effect of firm size; industry composition; and regional distribution; together with the interactions among these four effects. The interpretation of these effects is facilitated by the introduction within the MFP framework of a new decomposition of several key elements. The results show that the adopted approach and the suggested decompositions are useful to study the effect of size on employment change. This effect is found to be negative only for micro units (with less than 10 employees). For the other classes, it is positive. The observed negative changes in these classes are mainly due to the business cycle and an unfavourable industrial composition.