Small and Medium Enterprises, Growth, and Poverty: Cross-Country Evidence

47 Pages Posted: 20 Apr 2016

See all articles by Asli Demirgüç-Kunt

Asli Demirgüç-Kunt

World Bank

Thorsten Beck

City University London - The Business School; Tilburg University - European Banking Center, CentER

Ross Levine

Stanford University; National Bureau of Economic Research (NBER)

Date Written: December 2003

Abstract

Beck, Demirguc-Kunt, and Levine 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.

This paper - a product of Finance, Development Research Group - is part of a larger effort in the group to understand the role of SMEs.

Suggested Citation

Demirgüç-Kunt, Asli and Beck, Thorsten and Levine, Ross, Small and Medium Enterprises, Growth, and Poverty: Cross-Country Evidence (December 2003). Available at SSRN: https://ssrn.com/abstract=636597

Asli Demirgüç-Kunt (Contact Author)

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

Thorsten Beck

City University London - The Business School ( email )

106 Bunhill Row
London, EC1Y 8TZ
United Kingdom

Tilburg University - European Banking Center, CentER ( email )

PO Box 90153
Tilburg, 5000 LE
Netherlands

Ross Levine

Stanford University ( email )

Stanford, CA 94305
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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