2014
DOI: 10.1111/roie.12136
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Legal Reform, Contract Enforcement and Firm Size in Mexico

Abstract: The variation in legal system quality across states in Mexico is used to examine the relationship between judicial quality and firm size over the course of the 2000s, when systemic changes were taking place. Using economic census microdata and survey-based measures of legal institutions, a robust effect of judicial quality is observed on the firm size distribution and efficiency, instrumenting for underlying historical determinants of institutions. Indicative evidence is found that the effect is strongest in m… Show more

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Cited by 29 publications
(17 citation statements)
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“…Beck et al (2006) find that firm size is positively associated with institutional development (including judicial efficiency) and with the development of financial intermediaries. Similar findings have been produced in analyses exploiting within-country variations: Laeven and Woodruff (2007) and Dougherty (2012) for Mexico; García-Posada and Mora-Sanguinetti (2013) for Spain; Giacomelli and Menon (2012) for Italy. For the effect on financial market development see Bae and Goyal (2009), Qjan and Strahan (2007), Fabbri (2010; this effect has also been found exploiting the variance of judicial efficiency at the national level (Jappelli et al, 2005, for Italy;Padilla et al, 2007, for Spain;Shvets, 2012, for Russia, among others).…”
supporting
confidence: 78%
“…Beck et al (2006) find that firm size is positively associated with institutional development (including judicial efficiency) and with the development of financial intermediaries. Similar findings have been produced in analyses exploiting within-country variations: Laeven and Woodruff (2007) and Dougherty (2012) for Mexico; García-Posada and Mora-Sanguinetti (2013) for Spain; Giacomelli and Menon (2012) for Italy. For the effect on financial market development see Bae and Goyal (2009), Qjan and Strahan (2007), Fabbri (2010; this effect has also been found exploiting the variance of judicial efficiency at the national level (Jappelli et al, 2005, for Italy;Padilla et al, 2007, for Spain;Shvets, 2012, for Russia, among others).…”
supporting
confidence: 78%
“…Widespread corruption reduces the benefits of accessing to public goods and services, discouraging workers to demand a formal job; it also weakens the strength of controls by the authorities which encourage firms to propose informal jobs to workers. In addition, since better legal system quality increase enterprises' size (Dougherty, 2013), reducing corruption may also indirectly limit the share of microenterprises.…”
Section: Resultsmentioning
confidence: 99%
“…For Mexico, plantlevel data from the Annual Survey of Industries (EIA) and the Annual Survey of Manufacturing Industry (EAIM) -both conducted by Mexico's Institute of Statistics and Geography (INEGI)were used remotely with INEGI's support. Although the data is plant-level, they can be considered as effectively firm-level because more than 97 per cent of Mexico's firms are single-plant firms (Dougherty, 2014). Since the EIA evolved to become the EAIM, we use EIA data for years [2005][2006][2007][2008] and EAIM data for years 2009-2012.…”
Section: The Datamentioning
confidence: 99%