Remittances and the level of small and madium sized enterprise start-ups

Abstract: This thesis within economics is examining the impact that remittances could have on the level of new small and medium sized enterprise start-ups. Remittances could be seen as a capital flow and would therefore increase the level of new SME start-ups but is this really the case? A model is developed with a panel data set over 45 countries all across the globe over a two year period. Six businesses environment variables are included in the regressions to see how the businesses environment affects the level of new SME start-ups. This model is also used when testing if the relationship between remittances and the level of new SMEs are stronger in the middle income countries than in the lower income countries. The descriptive statistics shows that both remittances and the number of new SME`s have increased from 2003 to 2005. The level of new SME`s have increased with a larger percentage share in the middle income countries relative to low income countries. The results from this thesis are somewhat difficult to interpret. Although there seems to be the case that remittances are not affecting the level of new SME start-ups when including all the countries in the same regression. As the countries are divided into two groups one can see a stronger relationship between remittances and the level of new SME started in the low income countries than in the middle income countries. One can also see that credit right and the cost of starting a new business is strongly related to the level of new SME.