Integrating Firm Dynamics into the Shift‐Share Framework

ABSTRACT This article integrates firm birth and death data into a shift‐share analysis framework. The proposed methodology can be used when data availability does not allow for the direct association of employment changes to business demographics at the regional level. It may be also used as an exploratory step before any explanatory econometric work is undertaken as a means of identifying classes of potential control variables. Applying the method to Greek data suggests that firm‐size heterogeneity should not be ignored, that local conditions matter more than regional economic structure, and that the latter are asymmetrical across sectors when it comes to the effects of business demographics on regional employment or output growth.