Differences in efficiency between formal and informal micro-firms in Mexico

Abstract

Micro firmscan be seen as potential growth drivers, as they are usually related to entrepreneurship, a relatively high share of micro firms can also be a sign of an underdeveloped productive system.Unlike other studies, this researchseparates formal and informal micro firms in order to test whether there are efficiency differences between them, and to explain these differences. One of the novelties of the study is the use of the Oaxaca-Blinder decomposition method. The empirical evidence suggests that output and efficiency differences are not only explained by endowment characteristics but also by endowment returns