SMEs And Poverty Alleviation

Poverty alleviation is a significant issue all over the world, especially in developing countries, many governments and nongovernmental international organizations gradually reach to common knowledge: it is remarkable to see how the poverty group benefit from rapid economic growth. The China economy experienced a brilliant development ever after the reform, when the income level of Chinese increased dramatically while the population living in absolute poverty has been reduced from 250 million to hundreds of millions. However, Social gap grows wider, urban-rural gap, regional gap, group gap and individual gap become obvious, because of restraint and unbalance of China’s economic development level. Along with the more clearly society polarizing, more inclusive poverty alleviation has been mentioned gradually. Small and medium-sized enterprises(SMEs) have been playing an important role in creating jobs, increasing living standard and accelerating economy, this is an important lesson for poverty alleviation in China. As a consequence, the mechanism research of SMEs on poverty alleviation and how to improve its inclusiveness has great theoretical value and far-reaching meanings under such background. Besides, research on the relationships between economic growth and poverty alleviation is one of the hot problems at home and abroad. Over the years, scholars have been focusing on the theme of a large number of theoretical researches and practical exploration has been a lot of valuable experience and good results. Therefore, this paper will probes into the relationships between SMEs and poverty alleviation on the basis of others’ researches and it still will explore the mechanism of SMEs, inclusive labor market and other elements influence poverty alleviation.This article uses previous theoretical and empirical research. First of all, this article build a general theory of SMEs on poverty alleviation through literature study and logical dedection: SMEs play an important role on poverty alleviation by creating jobs, optimizing the employment structure, broadening income sources and adjusting labour force factor price, and create a more inclusive labor market in order to further improve the effect of SMEs on poverty alleviation and its inclusiveness. Then, This article takes the samples of the Chinese provincial data during the period 2003-2010 and conducts econometric test on this subject, and many frontier and classic research method in economics management will be used to test the theoretical framework such as system GMM method and panel threshold model.This research focuses on the basic problem of how “SMEs, inclusive labor market influence poverty alleviation”. Specially, this article will research on the following questions from shallow to deep. Firstly, how does quantitative dimensions of SMEs influence poverty alleviation? Secondly, how does inclusive labor market moderate the relationship between SMEs and poverty alleviation? Thirdly, how does characteristics dimensions of SMEs influence poverty alleviation?Through the above research, some conclusions are discovered as follows:Firstly, SMEs is good for poverty alleviation, but there is some regional and urban and rural differences. Entrepreneurship of SMEs is good for urban poverty alleviation and inequality narrows, but rural poverty group can not benefit from it. After accounting for the regional difference, the poverty alleviation effect still tend to urban, but more benefit from entrepreneurship of SMEs flows to urban high-income groups in the Eastern region. The development of SMEs demonstrates the influence of SMEs on urban poverty alleviation, but rural poverty group still can not benefit from it. After accounting for the regional difference, the poverty alleviation effect still tend to urban in the Midwest; In the Eastern, The effect of SMEs development on poverty alleviation was inclusive, rural poverty group can benefit from the development of SMEs, but the benefit was below average, the wealth gap was widening.Secondly, a more inclusive labor market can further improve the effect of SMEs on poverty alleviation and its inclusiveness. Under inclusive labor market conditions, the effect of SMEs development on poverty alleviation was improved, and the poor benefit more. Entrepreneurship of SMEs, which depends less on inclusive labor market is to the disadvantage of poverty alleviation instead. Furthermore, by the inclusive labor market reach 3.750, the effect of SMEs development on poverty alleviation will be improved, and the poor will benefit more. Meanwhile inclusive labor market is concentrated in the Eastern.Thirdly, the characteristics of SMEs have great influence on poverty alleviation. SMEs labor intensity affects the effect of SMEs on rural poverty reduction, and the more labour-intensive is, the more the influence is. Accompanied by changes in SMEs ownership structure, the effect of SMEs on rural poverty reduction is also taking changes:(1)The change proportion of private capital has significant positive effects on poverty reduction, and rural poverty group can benefit from it;(2)The change proportion of foreign investment capital also has significant positive effects on poverty reduction, although the magnitude was smaller than private capital;(3) However, the results show that it is negative correlation between the change proportion of state capital and poverty reduction. SMEs’ export is good for poverty alleviation, but the benefit for poor group was below average, the wealth gap was widening, and there is some regional and urban and rural differences.Fourthly, the effect of SMEs characteristics on poverty alleviation was dependent upon inclusive labor market. More specifically, under inclusive labor market conditions, the effect of foreign capital proportion change on poverty alleviation was improved, and rural poverty group can benefit from it; the change proportion of state capital is still harmful for poverty alleviation; the effect of private capital proportion change on poverty alleviation was improved too. Besides, under inclusive labor market conditions, the effect of SMEs’ export on poverty alleviation was improved, and inclusive labor market play an important role in the benefit for rural poverty group from SMEs’ export.Based on the above research, the results deepen our understanding of the basic problem of “SMEs, inclusive labor market influence poverty alleviation”, and this article have made a tiny contribute to the theory development and further research. combining with the main conclusions of the study, we provide several policy implications for further studied.Firstly, the Chinese government should strengthen market-oriented reforms and strategically take comprehensive measures to improve the environment of SMEs developing, encourage entrepreneurship of SMEs, support development of SMEs, fully bringing SMEs as the main body of market economy into play.Secondly, the Chinese government should continue to readjust and improve ownership structure of SMEs, encourage private capital entered the development of SMEs, attract more foreign investment, prompte SMEs’ export, give full play to the effect of SMEs on poverty alleviation.Thirdly, the Chinese government should aim for a more inclusive labor market to take some measures for eliminating labor market segmentation, coordinating industrial relations, safeguarding laborers’ rights and interests, building a universal social security system.