Family-managed Firms and Labor Demand Size Matters-but Only the Small Ones Are Different

Abstract This article analyzes the differences in labor demand between family and nonfamily-managed firms. The majority of firms in modern economies are still family-controlled. In addition, these firms seem to have better employment performance than other companies. Therefore, this study estimates a labor demand model with German establishment panel data to control for differences among these firms. The results of random effects and fractional panel probit estimations indicate that own-wage and output elasticities are lower in absolute values, thus supporting the assumption that family-managed firms offer some kind of implicit employment contracts with a larger job safety. However, this result does not hold if the investigation is restricted to establishments with 20 or more employees. There is no evidence of different behavior in larger family-managed firms. (JEL codes: J23, D22, G32, C23)