Econometric Modelling of the Impact of Small Business and Private Entrepreneurship Development on Poverty Reduction Under Entrepreneurial Diversification

This article estimates how sectoral diversification of entrepreneurship and the participation of small business in regional output and employment are associated with poverty in Uzbekistan. The balanced panel covers 14 regions over 2022–2025 (56 observations). A normalized Shannon entropy index is constructed from the distribution of operating small businesses across nine activities. Two-way fixed-effects models with region-clustered standard errors are estimated. Diversification, the small-business share of gross regional product, and its employment share carry poverty-reducing signs, but their coefficients are statistically imprecise in the short panel. By contrast, a one-percentage-point increase in unemployment is associated with a 2.116-percentage-point higher poverty rate (p=0.003). Mean regional poverty fell from 14.35% in 2022 to 5.74% in 2025, whereas the diversification index remained broadly stable. The findings support policy focused on productive, labour-absorbing diversification, value-chain integration and firm quality rather than enterprise counts alone; they should not be interpreted as fully causal because of the limited time span.