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Releasing Constraints to Growth or Pushing on a String? Policies and Performance of Mexican Micro-Firms

Author

Listed:
  • Pablo Fajnzylber
  • William F. Maloney
  • Gabriel V. Montes-Rojas

Abstract

Using firm-level data from Mexico, this paper investigates the firm characteristics associated with participation in credit markets, access to training, tax payments and membership in business associations. We find that firms which participate in these institutions exhibit significantly higher profits. Moreover, firms that borrow from formal or informal sources and those that pay taxes are significantly more likely to stay in business but firms that received credit exhibit lower rates of income growth. These results persist when firm characteristics that are arguably correlated with unobserved entrepreneurial ability are controlled for. Our findings suggest that the significant within-country differences in firm productivity observed in developing economies are due in part to market and government failures that limit the ability of micro-firms to reach their optimal sizes.

Suggested Citation

  • Pablo Fajnzylber & William F. Maloney & Gabriel V. Montes-Rojas, 2009. "Releasing Constraints to Growth or Pushing on a String? Policies and Performance of Mexican Micro-Firms," Journal of Development Studies, Taylor & Francis Journals, vol. 45(7), pages 1027-1047, August.
  • Handle: RePEc:taf:jdevst:v:45:y:2009:i:7:p:1027-1047
    DOI: 10.1080/00220380802264911
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    Citations

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    Cited by:

    1. Eleftherios Giovanis & Oznur Ozdamar, 2018. "The Nexus Between Business-Investment Climate and Firm Performance in the Middle East and North Africa (MENA) Region," Working Papers 1277, Economic Research Forum, revised 26 Dec 2018.
    2. Gupta, Himanshu & Barua, Mukesh Kumar, 2016. "Identifying enablers of technological innovation for Indian MSMEs using best–worst multi criteria decision making method," Technological Forecasting and Social Change, Elsevier, vol. 107(C), pages 69-79.
    3. Colin C. Williams & Abbi M. Kedir, 2017. "Starting-up unregistered and firm performance in Turkey," International Entrepreneurship and Management Journal, Springer, vol. 13(3), pages 797-817, September.
    4. Anuradha Joshi & Wilson Prichard & Christopher Heady, 2014. "Taxing the Informal Economy: The Current State of Knowledge and Agendas for Future Research," Journal of Development Studies, Taylor & Francis Journals, vol. 50(10), pages 1325-1347, November.
    5. Tran Thi & La Hai, 2018. "Why do household businesses in Viet Nam stay informal?," WIDER Working Paper Series 64, World Institute for Development Economic Research (UNU-WIDER).
    6. Amadou Boly, 2015. "On the benefits of formalization: Panel evidence from Vietnam," WIDER Working Paper Series 038, World Institute for Development Economic Research (UNU-WIDER).
    7. Colin C Williams & Abbi M. Kedir, 2016. "Business Registration And Firm Performance: Some Lessons From India," Journal of Developmental Entrepreneurship (JDE), World Scientific Publishing Co. Pte. Ltd., vol. 21(03), pages 1-19, September.
    8. Rasyad A. Parinduri, 2014. "Family Hardship and the Growth of Micro and Small Firms in Indonesia," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 50(1), pages 53-73, April.
    9. repec:eee:jbvent:v:34:y:2019:i:1:p:197-214 is not listed on IDEAS
    10. repec:taf:jdevst:v:52:y:2016:i:3:p:412-427 is not listed on IDEAS
    11. Nguyen Trong, Co & Vu Van, Huong & Bartolacci, Francesca, 2017. "Government support and firm financial performance: New evidence from a transitional economy," MPRA Paper 81752, University Library of Munich, Germany.
    12. Fajnzylber, Pablo & Maloney, William F. & Montes-Rojas, Gabriel V., 2009. "Does Formality Improve Micro-Firm Performance? Quasi-Experimental Evidence from the Brazilian SIMPLES Program," IZA Discussion Papers 4531, Institute of Labor Economics (IZA).
    13. Smriti Sharma, 2014. "Benefits of a registration policy for microenterprise performance in India," Small Business Economics, Springer, vol. 42(1), pages 153-164, January.
    14. Henrik Hansen & John Rand & Finn Tarp, 2009. "Enterprise Growth and Survival in Vietnam: Does Government Support Matter?," Journal of Development Studies, Taylor & Francis Journals, vol. 45(7), pages 1048-1069, August.
    15. Fajnzylber, Pablo & Maloney, William F. & Montes-Rojas, Gabriel V., 2011. "Does formality improve micro-firm performance? Evidence from the Brazilian SIMPLES program," Journal of Development Economics, Elsevier, vol. 94(2), pages 262-276, March.
    16. Nguyen, Hoai Thu Thi & Vu, Huong Van & Bartolacci, Francesca & Quang Tran, Tuyen, 2018. "Government Support and Firm Performance in Vietnam," MPRA Paper 93599, University Library of Munich, Germany, revised 12 Nov 2018.
    17. Rand, John & Torm, Nina, 2012. "The Benefits of Formalization: Evidence from Vietnamese Manufacturing SMEs," World Development, Elsevier, vol. 40(5), pages 983-998.
    18. Boly Amadou, 2015. "On the Effects of Formalization on Taxes and Wages: Panel Evidence from Vietnam," WIDER Working Paper Series 042, World Institute for Development Economic Research (UNU-WIDER).
    19. BenYishay, Ariel & Pearlman, Sarah, 2014. "Crime and Microenterprise Growth: Evidence from Mexico," World Development, Elsevier, vol. 56(C), pages 139-152.
    20. Denis Medvedev & Ana María Oviedo, 2016. "Informality and Profitability: Evidence from a New Firm Survey in Ecuador," Journal of Development Studies, Taylor & Francis Journals, vol. 52(3), pages 412-427, March.
    21. repec:gam:jsusta:v:10:y:2018:i:10:p:3495-:d:172812 is not listed on IDEAS
    22. repec:taf:jdevst:v:53:y:2017:i:3:p:396-421 is not listed on IDEAS
    23. Ram Mainali & Saqib Jafarey & Gabriel Montes-Rojas, 2017. "Earnings and Caste: An Evaluation of Caste Wage Differentials in the Nepalese Labour Market," Journal of Development Studies, Taylor & Francis Journals, vol. 53(3), pages 396-421, March.

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