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

Type Journal Article - Economic Development and Cultural Change
Title Firm dynamics and institutional participation: a case study on informality of micro-enterprises in Peru
Author(s)
Volume 54
Issue 3
Publication (Day/Month/Year) 2006
Page numbers 557-7
URL http://econpapers.repec.org/RePEc:ucp:ecdecc:y:2006:v:54:i:3:p:557-78
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 are sensitive to the initial size and growth trajectory of the firm.

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