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Firm dynamics and institutional participation: A case study on informality of micro enterprises in Peru

Jäckle, AE and Li, CA (2006) 'Firm dynamics and institutional participation: A case study on informality of micro enterprises in Peru.' Economic Development and Cultural Change, 54 (3). 557 - 578. ISSN 0013-0079

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Abstract

Panel data on micro enterprises from Peru were analyzed to contribute to the understanding of firm dynamics for modeling participation. An attempt was made to examine the firm's decision to participate. Unobserved heterogeneity arising from the omission of variables, such as entrepreneurial ability, drive, and dedication was tested and controlled. Evidence was obtained indicating that firm dynamics explain formality, defined as the decision to participate in societal institutions. Overall, findings lend support to cross-sectional results reported by Levenson and Maloney in 1998 for micro enterprises in Mexico and by Joumard et al. in 1992 and McPherson and Liedholm in 1996 for Niger and Swaziland. The evidence supports predictions that firms with viable cost structures transition from informality for formality as they grow. Furthermore, changes in participation appeared very sensitive to the firm's initial size and growth trajectory. Evidence was also obtained that differences in unobservable factors, such as individual abilities, contribute largely to differences in growth rates and societal participation.

Item Type: Article
Subjects: H Social Sciences > HB Economic Theory
Divisions: Faculty of Social Sciences > Institute for Social and Economic Research
Depositing User: Jim Jamieson
Date Deposited: 09 Aug 2012 09:12
Last Modified: 23 Jan 2019 01:15
URI: http://repository.essex.ac.uk/id/eprint/3623

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