Firm Dynamics and Institutional Participation: a Case Study on Informality of Micro-Enterprises in Peru

Publication type

Research Paper

Series Number

552

Series

Discussion Paper

Authors

Publication date

March 20, 2003

Abstract:

Using panel data on micro-enterprises from Peru we find evidence suggesting that firm dynamics explain 'formality', where formality is recast as the firm's decision to participate in societal institutions. The results suggest that differences in unobservable factors, such as entrepreneurial ability, contribute largely to differences in growth rates, survival chances and societal participation. After controlling for such unobserved heterogeneity, we find that the probability of participation increases with firm size but not with years in business. Changes in participation status over time are sensitive to the initial size and growth trajectory of the firm.

Notes

Discussion paper not held in library.


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