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Small and medium enterprises, growth, and poverty : cross-country evidence

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Thorsten Beck

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Abstract

The authors explore the relationship between the relative size of the small and medium enterprise (SME) sector, economic growth, and poverty using a new database on the share of SME labor in the total manufacturing labor force. Using a sample of 76 countries, they find a strong association between the importance of SMEs and GDP per capita growth. This relationship, however, is not robust to controlling forsimultaneity bias. So, while a large SME sector is characteristic of successful economies, the data fail to support the hypothesis that SMEs exert a causal impact on growth. Furthermore, the authors find no evidence that SMEs reduce poverty. Finally, they find qualified evidence that the overall business environment facing both large and small firms-as measured by the ease of firm entry and exit, sound property rights, and contract enforcement-influences economic growth.

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Paper provided by The World Bank in its series Policy Research Working Paper Series with number 3178.

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Date of creation: 01 Dec 2003
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Handle: RePEc:wbk:wbrwps:3178

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Keywords: Small Scale Enterprise Microfinance Economic Theory&Research Small and Medium Size Enterprises Environmental Economics&Policies Small and Medium Size Enterprises Governance Indicators Pro-Poor Growth and Inequality Microfinance Private Participation in Infrastructure

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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Timo Baas & Mechthild Schrooten, 2005. "Relationship Banking and SMEs : A Theoretical Analysis," Discussion Papers of DIW Berlin 469, DIW Berlin, German Institute for Economic Research. [Downloadable!]
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