The Small and Medium Enterprises and Poverty in Pakistan: An Empirical Analysis

Ali, Sharafat (2013): The Small and Medium Enterprises and Poverty in Pakistan: An Empirical Analysis. Published in: European Journal of Business and Economics , Vol. 8, No. 2 (September 2013): pp. 25-30.

Abstract

Small and Medium Enterprises (SMEs) are considered to play an important role in the economic growth, employment generation and poverty alleviation in the economy. The annual time series data is used for examination of impact of SMEs on poverty in Pakistan for the period of 1972-2008. The study utilizes Johansen cointegration and error correction mechanism to examine long run and short impacts small scale industries and other explanatory variable on poverty in Pakistan. The results of the study confirm a strong and poverty alleviating impact of small scale industries’ output in Pakistan. The study suggests the economic policy makers to focus on the establishment of formal financial markets to overcome the financial constraints faced by the SME sector in Pakistan. Simplification of lending procedures, enforcement of credit rights, and reduction in credit costs would be helpful for the establishment of robust SME sector in Pakistan.

• Item Type: MPRA Paper
• Language: English
• Keywords: Poverty, Small and Medium Enterprises, Income Inequality, Population Growth
• Subjects: C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models ; Multiple Variables > C32 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes ; State Space Models; I - Health, Education, and Welfare > I3 - Welfare, Well-Being, and Poverty > I30 - General; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O14 - Industrialization ; Manufacturing and Service Industries ; Choice of Technology

References

Abor, J. and Quartey, P. (2010). Issues in SME Development in Ghana and South Africa. International Research Journal of Finance and Economics, 39: 218-228.

Adelman, J. and S. Robinson (1989). Income Distribution and Development, in Chenery, Hl Srinivasan, T. N. (eds), Handbook of DevelopmentEconomics, Vol. II, Amsterdam: Elsevier Science Publishers B. V. Chapter 9, pp. 949-1003.

Advani, A. (1997). Industrial Clusters: A Support System for Small and Medium-Sized Enterprises, Private Sector Development. World Bank Occasional Paper No. 32, World Bank, Washington, DC.

Afzal, Mohammad (2009). Population Growth and Economic Development in Pakistan. The Open Demography Journal, 2: 01-07.

Agenor, Pierre-Richard (1998). Stabilization Policies, Poverty and the Labor Market, Mimeo, IMF and World Bank.

Agyapong, Daniel (2010). Micro, Small and Medium Enterprises’ Activities, Income Level and Poverty Reduction in Ghana-A Synthesis of Related Literature. International Journal of Business and Management, 5(12): 196-205.

Aina , Olayinka Chris Mnitp, RTP, Amnes (2007). The Role of SMEs in Poverty Alleviation in Nigeria. Journal of Land Use and Development Studies, 3(1):124-131.

Audretsch, David B. (2000). The Economic Role of Small and Medium-Sized Enterprises: The United States.

Beck, T., Demiruc-Kunt, A., and Livine R. (2005). SMEs, Growth and Poverty: A Cross-Country Evidence. Journal of Economic Growth, 10: 199-229.

Beck, T., Demiruc-Kunt, A., and Maksimovic, V. (2004). SMEs, Growth and Poverty-Do Pro-SME Policies Work? World Bank Policy Research Working Paper No. 268.

Berg, S. Van Der. (2008). Poverty and Education. Paris: International Institute for Educational Planning and Internal Academy of Education.

Berry, Albert (1998). The Potential Role of the SME Sector in Pakistan in a World of Increasing International Trade. The Pakistan Development Review, 37(4): 25-49.

Bolton, J. E. (1971). Report of the Committee of Inquiry on Small Firms. HMSO, London.

Bourgnuignon, F. (2004). The Poverty-Growth-Inequality Triangle. Paper presented at the Indian Council for Research on International Economic Relations, New Delhi, on February 4.

Bourguignon, F. (2003). The Growth Elasticity of Poverty Reduction: Explaining Heterogeneity across Countries and Time Periods. In Eicher, T. S., Turnovsky, S. J. (eds), Inequality and Growth: Theory and Policy Implications, Cambridge: MIT Press.

Bourguignon, G. (2001). The Pace of Economic Growth and Poverty Reduction. Paper presented at LACEA 2001 Conference, Montvideo, Uruguay (http://www. Nip-lac.org/programs_lacea/Bourguignon.pdf).

Cardoso, Eliana (1992). Inflation and Poverty. NBER Working Paper No. 4006.

Chaudhry, Imran Sharif (2009). Poverty Alleviation in Southern Punjab (Pakistan): An Empirical Evidence from the Project Area of Asian Development Bank. International Research Journal of Finance and Economics, 23:23-32.

Chaudhry, Imran Sharif; Malik, Shahnawaz; Hassan Abo Ul. and Faridi, Muhammad Zahir (2010). Does Education Alleviates Poverty? Empirical Evidence from Pakistan. International Research Journal of Finance and Economics, 52: 134-141.

Cook, P. and F. Nixon (2000). Finance and Small and Medium-Sized Enterprise Development. IDPM, University of Manchester , Finance and Development Research Programme Working Paper Series, Paper No. 14.

Datt, G. and Ravallion, M. (1992). Growth and Redistribution Components of Change in Poverty Measure: A Decomposition with Applications to Brazil and India in the 1980’s. Journal of Development Economics, 38(2): 275-295.

Durbin, J. (1970). Testing for Serial Correlation in Least-Squares Regression When Some of the Regressors Are Lagged Dependant Variable. Econometrica, 38: 410-721.

Economic Survey of Pakistan (Various Issues). Ministry of Finance, Government of Pakistan: Islamabad.

Engle, R. F. k, and Granger, C. W. (1987). Cointegration and Error Correction: Representation, Estimation and Testing, Econometrica, 55, 251-276.

Feeny, L. S. and A. L. Riding (1997). Business Owners’ Fundamental Tradeoff: Finance and the Vicious Circle of Growth and Control. Canadian Business Owner, November.

Gebremarian, G. H., Gebremedhin, T. G., and Jackson, R. W. (2004). The Role of Small Business in Economic Grwoh and Poverty Alleviation in West Verginia: An Empirical Analysis. The paper at the American Agricultural Economics Association Annual Meeting, Denver, Colorado, August 1-4.

Granger, C. W. F. (1988). Some Recent Developments in a Concept of Causality. Journal of Ecnometrica, 39: 199-211.

Johansen, S. (1991). Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models. Econometrica, 59(6), 1551-1580.

Johansen, S. (1995). Likelihood-based Inference in Cointegrated Vector Autoregressive Models. Oxford University Press.

Johansen, S., & Juselius K. (1990). Maximum Likelihood Estimation and Inferences on Cointegration with Application to the Demand for Money. Oxford Bulletin of Economics and Statistics, 52(2), 169-210.

Jordan, J., J. Lowe, and P. Taylor (1998). Strategy and Financial Policy in U.K. Small Firms. Journal of Business Finance and Accounting, 25(1/2):1-27.

Kakwani, N. (1993). Poverty and Economic Growth with Application to Cote D’Ivoire. Review of Income and Wealth, 39(2): 121-139.

Kalim, Rukhsana and Mohammad Shahbaz (2009). Remittances and Poverty Nexus: Evidence from Pakistan. International Research Journal of Finance and Economics,29: 46-59.

Kayanula, D., and P. Quartey (2000). The Policy Environment for Promoting Small and Medium-Sized Enterprises in Ghana and Malawi. Finance and Development Research Programme, Working Paper Series, Paper No. 15, IDPM, University of Manchester.

Li, Shi and Luo, Ghuliang (2008). Growth Pattern, Employment, and Income Inequality: What the Experience of Republic of Korea and Taipie, China Reveals to the People’s Republic of China. Asian Development Review, 25(1 and 2): 100-118.

Liedholm, C. and D. Mead (1987). Small Scale Industreis in Developing Countries: Empirical Evidence and Policy Implications. International Development Paper No. 9., Department of Agriculture Economics , Michigan State University, East Lansing, MI, USA.

Lipton, M. and Ravallion, M. (1995). Poverty and Policy. In Behrman, J., Srinivasan, T. N. (eds), Handbook of Development Economics, Vol. IIIB, Amsterdam: Elservier Science B. V.: pp. 2551-2657.

Loveman, G., and Sengenberger, W. (1991). The Re-emergence of Small Scale Production: An International Comparison. Small Business Economics, Vol. 3.

Lukas, E. (2005). The Economic Role of SMEs in World Economy, Especially in Europe. http//www.uni-miskolc.hu/uni/res/kozlemenyek/2005/pdf/lukacs.doc

Malik, Sohail J. (2005). Agriculture Growth and Rural Poverty: A Review of the Evidence. Pakistan Resident Mission Working Paper Series, Working Paper No. 2 : Asian Development Bank.

Mukras, M. S. (2003). Poverty Reduction Through Strengthening Small and Medium Enterprises. Botswana Journal of African Studies, 17(2): 58-69.

Mullineus, A. W. (1997). The Funding of Non-Financial Corporations (NFCs) in the EU (1971-1993): Evidence of Convergene. Mimeo, Department of Economics, University of Birmingham.

Myrdal, Gunner (1968). Asian Drama: An Inquiry into the Poverty of Nations. New York Pantheon.

Qureshi, S. K. and Ghani, E. (1989). Emplyment Generation in Rural Pakistan with a Special Focus on Rural Industrialization: A Preliminary Analysis. The Pakistan Development Review, 28(4): 587-402.

SBP Annual Report (Various Issues). State Bank of Pakistan , Karachi.

SBP Statistical Handbook (2010). State Bank of Pakistan, Karachi.

Schmitz, H. (1995). Collective Efficiency: Growth Path for Small Scale Industry. Journal of Development Studies,31(4): 529-566.

Sen, A. K. (1960). Choice of Techniques: An Aspect of the Theory of Planned Economic Development. Oxford: Basil Blackwell.

Todaro, M. P and Smith, S. C. (2009). Population Growth and Economic Development in Economic Development, Ed. 10, Published by Prentice Hall, PP-295-309.

UNIDO (2007). Creative Industries and Micro & Small Scale Enterprise Development: A Contribution to Poverty Alleviation. Project XP/RAS/05/002, United Nations Industrial Development Organization: Austria.

Voitchovsky, Sarah (2005). The Effect of Inequality on Growth: A Review of the Recent Empirical Literature. DFID Commissioned Study.

World Bank (1990). World Development Report 1990: Poverty, New York: Oxford University Press.

World Bank (2008). World Development Indicators, Washington D.C., December.