SMEs and economic growth in the Brazilian micro-regions

This paper examines the relationship between the small and medium enterprise (SME) sector and economic growth for a panel of 508 Brazilian micro-regions for the period 1980-2004. It investigates the importance of the SME sector size measured by the share of the SME employment in total employment, and the level of human capital in the SME sector measured by the average years of schooling in SMEs. Furthermore, it examines how these aspects of SMEs influence growth in regions with dissimilar level of development. The empirical findings show that the presence of SMEs is not positively correlated with growth and SMEs' human capital is more important for growth in more developed regions.