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

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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 for simultaneity 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.

Suggested Citation

  • Thorsten Beck, 2003. "Small and medium enterprises, growth, and poverty : cross-country evidence," Policy Research Working Paper Series 3178, The World Bank.
  • Handle: RePEc:wbk:wbrwps:3178
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Timo Baas & Mechthild Schrooten, 2006. "‘Relationship Banking and SMEs: A Theoretical Analysis’," Small Business Economics, Springer, pages 127-137.
    2. Naudé, Wim, 2011. "Entrepreneurship is Not a Binding Constraint on Growth and Development in the Poorest Countries," World Development, Elsevier, vol. 39(1), pages 33-44, January.
    3. Naude, Wim, 2008. "Entrepreneurship in Economic Development," WIDER Working Paper Series 020, World Institute for Development Economic Research (UNU-WIDER).

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