Small Business And Poverty: Evidence From Post-Soviet Cities

The relationship between small business and poverty is inadequately substantiated, despite being an important economic and social nexus. We test the direct impact of small business on poverty, and of poverty on small business. Using panel data across 115 post-Soviet cities in Armenia, Azerbaijan, Belarus, Georgia, Moldova, Russia and Ukraine, we examine early (1995-2002) and later (2003-08) transition periods. The findings show small business can reduce urban poverty during transition, and that higher poverty in cities impedes small business. We also find that changes in regional institutional context, knowledge and locational characteristics can facilitate or hamper both small business and poverty.