Nature and Life Expectancy of Informal Microenterprises in Mexico

Abstract

Using data from the Mexico’s National Survey of Micro enterprises and National Survey of Urban Employment, we search for the existing relationship between the motivations for starting an informal micro enterprise and its life expectancy that is estimated by a probability distribution in recent years. It was found that the micro enterprise sector shows a tendency towards informality; the proportion of informal micro enterprise and their expectancy of living have grown in the period. Particularly, the enterprises of informal employers have been consolidated as a profitable way of living. Moreover, the motivations for starting a small business are voluntary for most employers and involuntary for most self-employed. The life expectancy for the more mature informal projects based on self employment has been reduced because at some point, they become informal employers themselves at a low cost. The main challenge for organizations that promote and support micro enterprises in developing countries is to generate adequate and sufficient incentives for micro enterprise formalization.