Regional Economic Growth and SMEs in Brazil: a Spatial Analysis (Submission for the Refereed Y-session Papers).

This paper examines the relationship between economic growth and the Small and Medium Enterprise (SME) sector for a panel of 503 Brazilian micro-regions for the period 1980-2004 using panel spatial econometrics. 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. The exploratory spatial data analysis show strong evidence accounting for the existence of spatial dependence and indicate the use of spatial econometrics techniques to provide a more comprehensive analysis of the importance of entrepreneurship for regional economic growth. The empirical results indicate that the relative importance of SMEs (size of SME sector) is negatively correlated with economic growth. On the other hand, human capital embodied in SMEs present a positive and significant impact on economic growth. Moreover, the interaction of the relative size of the SME sector across space is positive and statistically significant for growth, suggesting that more SMEs in neighbouring regions incites productive entrepreneurship and new economic possibilities that affect economic performance positively. This is in line with the idea that entrepreneurial activities have a more positive influence on neighbouring regions than on distant regions due to cultural aspects. Besides, the spatial lag of human capital in SMEs is negatively related with growth and indicates that a given region does not benefit from a higher level of human capital in the neighbouring region; SMEs in regions with higher level of human capital only attract more skilled labour from neighbouring regions and do not generate any spillover for those regions. Therefore, a SME policy that subsidizes the creation of SMEs does not generate economic growth directly but through spatial interactions. Additionally, the promotion of human capital in SMEs seems to be important for regional growth, although there is no human capital spillover in the SME sector

Are Small Firms more cyclically Sensitive than Large Ones? National, Regional and Sectoral Evidence from Brazil.

An important issue facing policymakers is the degree to which fluctuations in economic activity affect employment in large and small businesses across sectors and regions. These issues are particularly relevant for developing countries, as they matter for the understanding of the labour market dynamics, and for devising regional, sectoral, and national labour policies. The unique data used in this paper was constructed using the CAGED database, which is a comprehensive administrative census dataset collected monthly by the Ministry of Labour in Brazil covering the formal sectors of the economy. Thus, monthly employment data for small and large establishments across regions and industries were constructed from 2000:1 to 2009:6 for each state and industry across the two-digit sectoral classification. This paper draws on the work of Moscarini and Postel-Vinay (2009) who analyse the correlations between measures of relative growth rate of employment by size class and business cycle conditions. As in their work, this paper uses detrended difference in employment growth rates between large and small firms as a measure of the relative performance of firms in different size bins. The evidence suggests that in Brazil small firms are more sensitive cycles, a result that contradicts Moscarini and Postel-Vinay (2009). The differential growth of employment between large and small establishments is negatively correlated with measures of business cycles, indicating that SMEs shed proportionally more jobs in recessions and gain more in booms. This pattern is also observed in most of the Brazilian States; however, there is a substantial variation in the manner the difference in employment growth rates correlates with business cycles at regional level. Besides, the sectoral analysis supports the evidence that formal small businesses are more sensitive than large ones in all sectors but in the commerce. This finding is important and might be related with the fact that the commerce sector relies heavily on informal workers that are the first ones to be hired or made redundant over the business cycles. Therefore, the evidence from this paper suggests that in a developing country context small establishments are more sensitive than large ones to business cycle conditions

The Impact of Business Support Services for Small and Medium Enterprises on Firm Performance in Low -and Middle- Income Countries: A Meta-Analysis

Interventions designed to support small and medium enterprises (SMEs) are popular among policy makers, given the role SMEs play in job creation around the world. Business support interventions in low- and middle-income countries (LMICs) are often based on the assumption that market failures and institutional constraints impede the growth of SME growth. Significant resources from governments and international organizations are directed to SMEs to maximize their socioeconomic impact. Business-support interventions in LMICs most often relate to formalization and business environments, exports, value chains and clusters, training and technical assistance, and access to credit and innovation. Very little is known about the impact of such interventions despite the abundance of resources directed to SME business-support services. This paper systematically reviews and summarizes 40 rigorous evaluations of SME-support services in LMICs and presents evidence to help inform policy debates. The study found indicative evidence that overall business-support interventions help improve firm performances and create jobs. However, little is still known about which interventions work best for SMEs and why. More rigorous impact evaluations are needed to fill the large knowledge gap in the field

SMEs and Regional Economic Growth in Brazil

This paper examines the relationship between the Small and Medium Enterprise (SME) sector and economic growth for an annual panel of Brazilian states for the period 1985-2004. We investigate the importance of the relative size of the SME sector measured by the share of the SME employment in total formal employment and the level of human capital in SMEs measured by the average years of schooling of SME employees. The empirical results indicate that the relative importance of SMEs is negatively correlated with economic growth, a result that is consistent with previous studies examining developing countries. In addition, our results also show that human capital embodied in SMEs may be more important for economic growth than the relative size of the SME sector.Firm size, market structure, economic growth, human capital.

The Brazilian regional development funds and economic growth: A spatial panel approach

The regional development policy in Brazil materializes mainly in the regional development funds for the north-east (FNE), the north (FNO), and the centre-west (FCO), in which more than EUR36 billion was invested between 2004 and 2010. This paper examines the economic effect of these regional development funds using for the first time a unique and recent data provided by Brazil's government. The study uses spatial panel models and different spatial scales of municipalities and micro-regions to analyse the effect of development funds on regional GDP per capita growth during 2004-10. The results suggest that development funds have positive impact on GDP per capita growth mainly at municipality level. Furthermore, the results indicate that different modalities of FCO, FNO, and FNE affect regional growth differently

HUMAN CAPITAL THRESHOLDS AND ECONOMIC GROWTH IN BRAZIL

This paper examines the convergence process in Brazil over the period 1985-2004, giving a special attention to the role of human capital in this process. Different measures of human capital are used in the growth regressions and the results show that they play a significant role in explaining the economic growth process. The evidence indicates that different levels of human capital have different impacts on per capita GDP growth, depending on the level of development of the regions. Lower levels of human capital explain better the convergence among the less developed states and higher levels of human capital are more adequate among the more developed states

Effects of job referrals on labor market outcomes in Brazil

This paper is the first to use program administrative data from Brazil’s National Employment System (SINE) to assess the impact of SINE job interview referrals on labor market outcomes. We use data from a five-year period (2012–16) to evaluate the impact of SINE job referrals on reemployment, time until reemployment, job tenure, and wage rates. Causal impact estimates based on propensity score matching suggest that a SINE job interview referral increases the probability of finding a job within three months of the referral and reduces the number of months needed to find reemployment, the average job tenure of the next job, and the reemployment wage. Subgroup analysis suggests that SINE is particularly effective at helping less educated workers find work in a timely fashion. Finally, the evidence suggests that the self-service online labor exchange is less effective than the in-person job interview referrals provided at SINE offices

Heterogeneous Impacts on Layoffs of Changes in Brazilian Unemployment Insurance Eligibility Rules

This paper is based on the first use of program administrative data from Brazil’s unemployment insurance (UI) program to assess the impact of changes in UI eligibility criteria on layoff probabilities. We exploit exogenous program changes introduced by executive and legislative changes in 2015 to estimate impacts while accounting for the number of prior UI benefit requests. We estimate that changes in UI eligibility criteria had heterogeneous impacts distinguished by the number of prior benefit requests. We show that the 2015 changes in UI eligibility rules reduced layoffs and find evidence that the changes reduced collusion between workers and employers for layoffs because it became harder to extract subsidies from the UI system. The layoff reductions were greatest before workers\u27 second benefit request