Expansion of Small Enterprises in Pakistan and its Impact on Poverty Alleviation

The objective of this research paper is to analyze the determinants of the expansion of small enterprises and its impact on the poverty alleviation in Pakistan. A time series data is taken for the period of 1974 to 2014. Data is collected from the World Bank database. Poverty head count ratio is used as the dependent variable while gross domestic product, growth rate per capita, public expenditure on education as percentage of GDP, volume of exports as percentage of GDP, patent applicant for non-residents, trademark applications, high technology exports and inflation rate are independent variables. Vector Auto Regressive Distributed Lag model is used due the different order of the unit roots testing. Error correction model (ECM) is used to analyze the short run behavior of variables. Our study results show that long run and short run positive relationships exist between determinants of expansion of small enterprises and poverty headcount ratio in Pakistan. Our study suggests that government should take steps to enhance the education level and employment opportunities through encouraging the small enterprises in Pakistan.