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A tale of two species: Revisiting the effect of registration reform on informal business owners in Mexico

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  • Bruhn, Miriam

Abstract

Some argue that informal business owners are viable entrepreneurs who do not register due to complex regulation. Others claim that they are making a living while searching for a job. This paper suggests that a mix of both views is correct. I separate informal business owners into those who have characteristics similar to wage workers and to formal business owners and study the impact of a business registration reform in Mexico on these two species. Informal business owners from the wage worker species are less likely to register due to the reform, but more likely to become wage workers since the reform created jobs. Informal business owners from the formal business owner species are more likely to register, but only in municipalities with high pre-reform constraints to formal entrepreneurship. These results explain why Bruhn (2008, 2011) finds no effect of the reform for all informal business owners taken together.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Development Economics.

Volume (Year): 103 (2013)
Issue (Month): C ()
Pages: 275-283

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Handle: RePEc:eee:deveco:v:103:y:2013:i:c:p:275-283

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Web page: http://www.elsevier.com/locate/devec

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Keywords: Informal sector; Business registration reform; Entrepreneurship;

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References

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Cited by:
  1. Sara G. Castellanos & F. Javier Morales & Mariana A. Toran, 2012. "Analisis del uso de servicios financieros por parte de las empresas en Mexico. Que nos dice el Censo Economico 2009," Working Papers 1215, BBVA Bank, Economic Research Department.
  2. Sara G. Castellanos & F. Javier Morales & Mariana A. Toran, 2012. "Analysis of the Use of Financial Services by Companies in Mexico. What does the 2009 Economic Census tell us," Working Papers 1216, BBVA Bank, Economic Research Department.

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