Notes

^1.

Balakrishnan (2008) showed that, in the years from 1993 to 2004, firms with 0 to 19 employees accounted for roughly 40% of job reallocation, the sum of gross job creation and gross job destruction.

^2.

See, for example, Acs and Audretsch (1990).

^3.

See Baldwin and Gellatly (2003) and Nooteboom (1994).

^4.

For example, Baldwin et al. (2002) compared the employment, shipments, and value-added shares of small, medium-sized, and large firms in the manufacturing industry, and Leung et al. (2008) presented employment shares by firm size for the non-agricultural, non-financial portion of the corporate sector in the two countries.

^5.

Owner-occupied housing is excluded from the business sector because it is produced by the household sector.

^6.

See, for example, Beck et al. (2003).

^7.

See, for example, Almon and Tang (2009) and Leung et al. (2008).

^8.

The next step would be to develop labour input measures by firm size for the two countries.

^9.

The IRS tabulations are available at www.irs.gov/taxstats/index.html.

^10.

The U.S. Census Bureau tabulations are available at www.census.gov/econ/susb.

^11.

Benefits are not allocated by means of payroll shares. In both Kobe (2007) and Leung et al. (2011), supplementary data sources were used to allocate the legislated and non-legislated portions of supplementary labour income to firm-size classes. The methodology and data sources employed in Leung et al. (2011) to allocate supplementary labour income are also used in this paper.

^12.

The Canadian GDP-by-size estimates are calculated by using the same revenue-size categories as those presented in the IRS tables. Adjusting the size categories by industry-specific purchasing power parities does not substantially change the results.

^13.

More specifically, the estimates are first benchmarked to Rispoli (2009a,b,c), who generated value-added by component for unincorporated businesses and for corporations. These, in turn, are benchmarked to the Input-Output Accounts.

^14.

The estimate of large-sized unincorporated enterprises was based on the aggregation of GDP items (labour income, interest payments, taxes paid, depreciation, and net income) from the redesigned T1 2008 tax data for unincorporated enterprises. Data on large-sized unincorporated enterprises are included mostly under partnerships. The redesign involved separating enterprises in the 2008 T1 income tax returns into sole proprietorships and partnerships. A database on partnerships linking the individual T1 enterprises involved in partnerships to the other partnerships was developed by using T5013 (Statement of Partnership Income) information or other partnership information as reported on the T1 income tax returns. At present, these data are not available for years prior to 2008. As a consequence, the estimate of large-sized unincorporated enterprises could not be drawn for previous years.

^15.

For a detailed description of the allocation of indirect taxes on products in the United States, see Horowitz and Planting (2009).

^16.

It is found that 75% of the GST/HST collected by firms in the trade industry is collected by retailers and that 25% is collected by wholesalers.

^17.

SNA profits are based on operating profits, profits earned as a result of production, rather than on total profits.

^18.

As in Leung et al. (2011), this paper uses the GIFI and T4 files prepared by the Enterprise Statistics Division and Income and Expenditure Accounts Division, respectively, at Statistics Canada.

^19.

Moreover, the industry of a multi-unit firm is determined by means of payroll in the SUSB, the same approach as in Leung et al. (2011).

^20.

See Internal Revenue Service (2010) for more details.

^21.

Businesses file unconsolidated returns in Canada. For the purposes of this analysis, the Business Register is used to aggregate these unconsolidated returns to the ultimate parent enterprise group. In the process of aggregating unconsolidated returns, care was taken to omit items in the income statement that would lead to double counting in revenues and profits.

^22.

The business sector excludes agriculture and owner-occupied housing.

^23.

Since the collection of net indirect taxes on products in Canada is evenly distributed between small and large businesses, the shares of GDP at market prices by business size are not substantially different from those at basic prices. Leung et al. (2011) reported that small businesses in Canada generated 54.3% of business-sector GDP at basic prices.