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

By Pablo Fajnzylber, William F. Maloney, Gabriel Montes-Rojas. 2009

130 citations recorded by the source corpus.

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.

Subfields: Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/fb1cc08a8e12664c613224529661ed4fb8dabb27

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In Economics and Econometrics

Citations in the corpus

Enterprise Growth and Survival in Vietnam: Does Government Support Matter? (2009, methodology): “Fajnzylber et al. (2009) address aspects of the impact of forms of government support on microenterprises in Mexico, using various techniques to identify treatment effects of credit, training and tax payments (as a measure of formality, hence a proxy for potential access to public services) on firm ”
The Benefits of Formalization: Evidence from Vietnamese Manufacturing SMEs (2012, background): “Analyzing profits in Mexican micro enterprises Fajnzylber, Maloney, and Montes-Rojas (2009) show that becoming official increases business profits by at least 20 pct.”
Does formality improve micro-firm performance? Evidence from the Brazilian SIMPLES program (2011, methodology): “Taken together, these rates of increase are similar to those found in Fajnzylber et al. (2009) estimates for the impact of formality in Mexico.”
Taxing the Informal Economy: The Current State of Knowledge and Agendas for Future Research (2014, methodology): “Moving beyond panel data techniques, Fajnzylber et al. (2009b) use a regression discontinuity design in order to exploit a natural experiment offered by reforms introduced in Brazil in 1996 that made it easier for small firms to formalise.”
The Role of Government Support in Sustainable Competitive Position and Firm Performance (2018, background): “[27] claimed that government support in term of credit, tax and loan access can facilitate a firm to achieve SCP in a turbulent market.”