Role of Small Enterprises in Economic Development

The objective of this research paper is to analyze the role of small entrepreneurs in economic development of Pakistan. For this purpose, we collected time series data for the period from 1972 to 2018. The GDP growth rate was taken as dependent variable while population growth rate, gross fixed capital formation, interest rate and trade openness were taken as independent variables. Statistical techniques such as ADF test, Correlation analysis ARDL and ECM models, were applied to determine long-run and short-run relationships between variables. Our empirical results show that all independent variables: population growth rate, gross capital formation, and trade openness are positively related with small enterprises in the long run except interest rate. Our study suggests to encourage small enterprises to play their effective role in promotion of entrepreneurship, job creation, innovations and economic development.