In business: the role of micro, small and medium enterprises in economic output
Date
2016-12-13
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Abstract
Support for micro, small, and medium Enterprises (MSMEs) has been extensive in different
economies around the world because of the belief that it drives economic development through
job creation, innovation, and better competition. For this same reason, and the fact that MSMEs
make up a significant number of total establishments and share of employment generated, the
Philippines has been pushing for MSME development through numerous initiatives. However,
skeptical views regarding the importance of MSMEs in economic development cannot be
ignored; most notable among them the argument that it is the overall business environment and
atmosphere, rather than MSME proliferation that affects economic output.
In this study, we aim to measure the effect of MSMEs on economic output measured by the gross
value added per sector. Other sector-specific and macroeconomic variables obtained from various
sources from years 2011-2014 are included. Estimations are done using a panel data regression,
with the fixed effects model being the most suitable method as given by the Hausman test.
Results show that the MSME variables are insignificant to output, while the business environment
variable, inflation and total employment prove to be significant.
These results encourage government to push for a better overall business environment and
improved human capital to achieve economic development. Total employment and inflation must
also be kept in check to achieve an increasing level economic output. Although data limitations
diminish the explanatory power of our findings, we hope to still contribute to the sparse research
in the field.
Description
Keywords
MSMEs, economic output, distance to frontier, gross value added, fixed effects