Does the Productivity of SMEs Affect Poverty Within the EU27? An Empirical Investigation

Abstract

We examine the relationship between small and medium enterprises’ (SMEs’) productivity and the living standards of low-income groups in the EU27. To the best of our knowledge, this is the first study that tries to shed light on the link between SMEs’ productivity and poverty in a group of developed economies. Our results from panel estimators suggest a robust positive link between the income—in purchasing power standards (PPS) terms—of the poor population and the productivity (gap) of very small firms, small firms, and SMEs. Such effect also appears to hold true, especially for SMEs, during Covid19. Finally, we explore the same link for the high-tech, knowledge-intensive SMEs and confirm a strong positive relationship before Covid19.