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We investigate the issue of model uncertainty in cross-country growth regressions using Bayesian model averaging (BMA). We find that the posterior probability is distributed among many models, suggesting the superiority of BMA over any single model. Out-of-sample predictive results support that claim. In contrast with Levine and Renelt (1992), our results broadly support the more “optimistic” conclusion of Sala-i-Martin (1997b), namely, that some variables are important regressors for explaining cross-country growth patterns. However, the variables we identify as most useful for growth regression differ substantially from Sala-i-Martin’s results.

Econometrics --- Foreign Exchange --- Economics: General --- Economic Growth and Aggregate Productivity: Other --- Bayesian Analysis: General --- Model Evaluation and Selection --- Education: General --- Informal Economy --- Underground Econom --- Health: General --- Education --- Economics of specific sectors --- Bayesian inference --- Health economics --- Currency --- Foreign exchange --- Informal economy --- Bayesian models --- Health --- Exchange rates --- Informal sector --- Economics --- Econometric models

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This paper offers empirical evidence that greater financial inclusion of small and medium enterprises (SMEs) can promote higher economic growth and employment, especially in the Middle East and Central Asia regions. First, we show that countries with higher SME financial inclusion exhibit more effective monetary policy transmission and tax collection. Second, we find substantial employment and labor productivity growth gains at the firm level from access to credit, gains that are higher for SMEs. We also obtain evidence of a substantial positive impact on SME employment and labor productivity growth from improved credit bureau coverage and insolvency regimes. Finally, cross-country aggregate evidence confirms the employment and growth gains from SME financial inclusion, which appear larger in the Middle East and Central Asia than in other regions.

Small business --- Businesses, Small --- Medium-sized business --- Micro-businesses --- Microbusinesses --- Microenterprises --- Small and medium-sized business --- Small and medium-sized enterprises --- Small businesses --- SMEs (Small business) --- Business --- Business enterprises --- Industries --- Finance. --- Size --- Corporate Finance --- Finance: General --- Labor --- Production and Operations Management --- Consumer Economics: Empirical Analysis --- Economic Development: Financial Markets --- Saving and Capital Investment --- Corporate Finance and Governance --- Economic Growth and Aggregate Productivity: Other --- Financial Markets and the Macroeconomy --- Corporate Finance and Governance: General --- Human Capital --- Skills --- Occupational Choice --- Labor Productivity --- Macroeconomics: Production --- Employment --- Unemployment --- Wages --- Intergenerational Income Distribution --- Aggregate Human Capital --- Aggregate Labor Productivity --- Finance --- Ownership & organization of enterprises --- Macroeconomics --- Labour --- income economics --- Financial inclusion --- Small and medium enterprises --- Labor productivity --- Productivity --- Financial markets --- Economic sectors --- Production --- Financial services industry --- Industrial productivity --- Economic theory --- Armenia, Republic of