Constrained Firms, Not Subsistence Activities: Evidence on Capital Returns and Accumulation in Peruvian Microenterprises

Kristin Göbel, Michael Grimm and Jann Lay

No 6866, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: We investigate the returns to capital and capital accumulation using panel data of Peruvian micro enterprises (MEs). Marginal returns to capital are found to be very high at low levels of capital, but rapidly decreasing at higher levels. The dynamic analyses of capital accumulation in MEs suggest that credit constraints explain a major part of the variation in firm growth. We find a very large positive effect of household non-business wealth on capital stocks of MEs. We also show a sizable effect of risk on accumulation and pronounced interactions between wealth and risk. The presented evidence is consistent with poorly endowed entrepreneurs who operate in imperfect capital markets and a very risky environment.

Keywords: risk; credit constraints; micro and small enterprises; risk aversion; firm growth; Peru (search for similar items in EconPapers)
JEL-codes: D13 D61 O12 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2012-09
New Economics Papers: this item is included in nep-ent and nep-mfd
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Published - published in: Labour Economics, 2015, 33, 94-110

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Related works:
Journal Article: Constrained firms, not subsistence activities: Evidence on capital returns and accumulation in Peruvian microenterprises (2015)
Working Paper: Constrained firms, not subsistence activities: Evidence on capital returns and accumulation in Peruvian microenterprises (2013)
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