New Firm Formation—a Labour Market Approach to Industrial Entry*

This paper argues that a major local factor influencing the rate of new-firm formation is the rate at which jobs are shed in that locality. The evidence presented shows that in Northern England there appears to be no association between changes in, or absolute national levels of, profitability in the ith industry and new firm formation rates in that industry. On the other hand, formation rates in the ith industry in the region are positively correlated with job shedding.