Small vs Large Firms Leverage: Determinants and Structural Relations

2002 ◽  
Author(s):  
Susana Menéndez Requejo
Keyword(s):  
Large Firms ◽  
Structural Relations

The impact of formality on firm profitability in Bolivia: an heterogeneous assessment

2012 ◽  
pp. 53-74
Author(s):  
Darwin Ugarte Ontiveros
Keyword(s):  
Empirical Literature ◽  
Large Firms ◽  
Marginal Effects ◽  
Heterogeneous Effects ◽  
Firm Profitability ◽  
The Impact ◽  
Formal Status

Recent evidence suggests that formality improves micro-firms profits in Bolivia. This gain is only for firms with 2 to 5 workers, while smaller and larger firms would lose out by formalizing (McKenzie and Sakho, 2010). However, as much of the empirical literature on this topic, the estimations are based on strong assumptions about unobservables. If the returns to formality vary among firms and these variations influence selection into formality, traditional estimators are biased (Heckman and Vytlacil, 2007). In this paper we considerthese elements to estimate the heterogeneous effects of formality on firm profits in Bolivia. We find remarkable heterogeneity in the returns to formality, from -3% to 6%. The group of firms with positive marginal effects from formality corresponds to those which are most likely to register. We also characterize the firms that likely benefit from having a formal status. These would correspond to large firms which work at big scales.

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