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Abstract

The development of the small and medium enterprise sector is believed to be crucial for economic growth and poverty alleviation. Those who seek to develop the sector must consent with the general perception that small- and medium-scale enterprises are at a disadvantage compared with larger firms. In theory, however, smaller firms may also have advantages over larger firms. For instance, they may be less affected by excessive regulations because they can more easily slip into informal arrangements. This paper draws on a new private sector survey covering 80 countries and one territory to study the question whether business obstacles are related to firm size. The main finding is that there is indeed a bias against small firms. Overall (that is, for the world sample) small firms report more problems than medium-sized firms, which in turn report more problems than large firms. In particular, smaller firms face significantly more problems than larger firms with financing, taxes and regulations, inflation, corruption and street crime. Thus these impediments should be prime targets for policies directed at leveling the playing field. Some of the most severe perceived impediments to doing business affect firms of all sizes, and consequently call for across-the-board policy improvements. In addition to the world wide analysis, the paper presents an analysis by regions and by individual countries.

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