Employment Drivers in Small and Medium-Sized Enterprises in Poland

Abstract

The paper encapsulates empirical research on factors driving employment in small and medium-sized enterprises (SMEs) in Poland. A linear econometric model has been constructed whereby the workforce employed in SMEs (expressed as a percentage of the total number of the working population) has been used as a dependent variable. The quality of the model’s results is high, in particular, it may be interpreted as an econometric record of a long-term co-integrating relationship. Further to the research, a hypothesis has been set whereby an increase in employment within this group of enterprises is affected by an increase in the index of monetary freedom and reduction of budget deficit. An analysis of alternative models has also performed demonstrating that an increase in the index of fiscal freedom and a decrease in public debt tends to boost employment in the SME sector as a proportion of the population employed. Intriguing conclusions have been drawn from the analysis of an alternative model under which a strongly correlated unemployment rate has been used as a dependent variable instead of the ratio of budget deficit to the GDP. Consequently, if the unemployment rate increases, the number of people employed in SMEs as a proportion of the employed population appears to grow as well.