Constrained Potential: A Characterisation of Mexican Microenterprises
Ana Karen Negrete Garcia
No 309, GIGA Working Papers from GIGA German Institute of Global and Area Studies
This paper investigates the existence and nature of constraints prevailing among Mexican microenterprises. It provides inter-temporal insights by relying on firm-level data spanning from 1994 to 2012. A performance index is defined based on firm levels of capital stock and monthly profits, and is used to estimate the empirical probability of a business's success. The predicted values are used to classify every microenterprise into one of three categories: upper, middle, or lower segment. Overall, the study provides evidence of constrained productivity and capital misallocation. Specifically, middle-segment firms exhibit entrepreneurial features and their average marginal returns are 15 percent. Because this segment faces mainly external constraints, cost-effective interventions are plausible. Regarding the lower-segment firms, it is estimated that their average monthly marginal returns are 30 per cent, compared to 1 per cent for the upper segment. It is also shown that, over time, the share that middle-segment firms represent relative to all microenterprises increased from 16 to 22 percent. Lastly, the sources of variation in monthly profits among segments are explored using the Oaxaca-Blinder decomposition method.
Keywords: microenterprises; returns to capital; constrained productivity; Mexico; decomposition method; empirical probability (search for similar items in EconPapers)
JEL-codes: C25 D22 D24 N86 O12 O17 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec and nep-ent
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:gigawp:309
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