The Effect of Support Policies on Employment Growth through SMEs Support – Case of Republic of Kosovo

Abstract

This paper examines the effect of support policies on employment growth thought SMEs support. SMEs are promoters of economic development, but being small, they are also very vulnerable to the unfavorable business environment thus they need to be supported. The paper will specifically address the impact of government subsidies, loans, investment capital and interest rate on SMEs growth seeing from their turnover. Kosovo is a country in transition therefore it is expected that these effects will be interesting, as the opportunities of government institutions to help them are very poor either by the lack of means or by the wrong allocation of funds in sectors that have no influence in the economy. The analysis of the results was done using econometric models such as simple OLS regression GMM method. The result from these models have shown that SMEs in Kosovo have not been able to generate new jobs for the period of research, and government and credit policies need to be reoriented in order to help SMEs increase their employment. There are many studies that have provided different opinions about these effects. Hence, their findings and results from this empirical analysis will draw useful conclusions and recommendations.

Keywords: SMEs, turnover, effects, policies, subsidies, loans, capital investment, interest rate.