Determinants Of Firms Dynamics In The Informal Sector A Case Study From Perú

The paper examines the characteristics of small and medium-sized enterprises and their dynamics using a panel database of urban informal firms from Perú. Investment and survival comprise key decisions explaining firms’ dynamics. The evidence shows that determinants of investment are explained by the firms’ regional location, the owner’s reasons for creating the firm, his or her marital status, the profit rate and in a lower percentage having credit experience, the size of their family, the household’s total wage-income and characteristics as education and age of the owner. On the other hand, firms’ survival is determined by the owners’ and the firm’s age, the number of firms in the household and the firm’s size.