Small Business Economics

, Volume 43, Issue 1, pp 75–99 | Cite as

Who creates jobs in developing countries?

  • Meghana AyyagariEmail author
  • Asli Demirguc-Kunt
  • Vojislav Maksimovic


This paper investigates the contribution of small firms to employment, job creation, and growth in developing countries. While small firms (<20 employees) have the smallest share of aggregate employment, the small and medium enterprise sector’s (<100 employees) contribution is comparable to that of large firms. Small firms have the largest shares of job creation, and highest sales growth and employment growth, even after controlling for firm age. Large firms, however, have higher productivity growth. Conditional on size, young firms are the fastest growing and large mature firms have the largest employment shares but small young firms have higher job creation rates.


Small and medium enterprises Employment Job creation Growth 

JEL Classifications




We thank Miriam Bruhn, Leora Klapper, David McKenzie, Rita Ramalho, and Roberto Rocha for useful comments and suggestions. We would like to thank Yuzhen He for excellent research assistance. This paper’s findings, interpretations, and conclusions are entirely those of the authors and do not necessarily represent the views of the World Bank, its Executive Directors, or the countries they represent.


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Copyright information

© Springer Science+Business Media New York 2014

Authors and Affiliations

  • Meghana Ayyagari
    • 1
    Email author
  • Asli Demirguc-Kunt
    • 2
  • Vojislav Maksimovic
    • 3
  1. 1.School of BusinessGeorge Washington UniversityWashingtonUSA
  2. 2.World BankWashingtonUSA
  3. 3.Robert H. Smith School of BusinessUniversity of MarylandCollege ParkUSA

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