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Estimating the Effects of Formality on Mexican Informal Microfirms. A Joint Multivariate Approach

Listed author(s):
  • Sonia Di Giannatale


    (Associate professor of Economics, Department of Economics, CIDE. Mexico City. Mexico.)

  • Gibrán Ramírez-Abarca


    (Director, Department of Public Policies for Productivity, Secretaría de Hacienda y Crédito Público. Mexico City. Mexico.)

  • Ricardo Smith


    (Adjunct professor of Economics, Department of Economics, CIDE. Mexico City. Mexico.)

In this article we use a multivariate framework to estimate net profits and levels of capital and labor for informal Mexican microfirms had they been formal. We estimate a Roy model to simultaneously model three different microfirm responses conditional on the sector (formal or informal) choice. Responses include profits and levels of labor and capital to be used in each sector. Our results indicate that the formal counterfactuals of currently informal microfirms employ higher levels of labor and physical capital; yet, they do not earn higher profits.

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Article provided by in its journal Economia Mexicana NUEVA EPOCA.

Volume (Year): XXII (2013)
Issue (Month): 4, Cierre de época (II) ()
Pages: 441-463

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Handle: RePEc:emc:ecomex:v:22:y:2013:i:4:p:441-463
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