Inequality and Employment in a Dual Economy
This paper studies the impact of an increase in the enforcement of labor regulations on unemployment and inequality, using city level data from Brazil. We find that stricter enforcement (affecting the payment of mandated benefits to formal workers) leads to: higher unemployment, less income inequality, a higher proportion of formal employment, and a lower formal wage premium. Our results are consistent with a model where stricter enforcement causes a contraction in labor demand in both the formal and informal sectors; and where workers value mandated benefits highly, so that there is an increase in the formal sector labor supply, an increase in the willingness to become unemployed to search for a formal sector job, and a decrease in labor supply to the informal sector.
| Main Authors: | , |
|---|---|
| Format: | Working Paper biblioteca |
| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2007-11-17
|
| Subjects: | INEQUALITY, EMPLOYMENT, LABOR REGULATIONS, INFORMAL LABOR, DUAL ECONOMY, LABOR MARKET, |
| Online Access: | http://documents.worldbank.org/curated/en/408911495747492410/Inequality-and-Employment-in-a-Dual-Economy-Enforcement-of-Labor-Regulation-in-Brazil https://hdl.handle.net/10986/28270 |
| Tags: |
Add Tag
No Tags, Be the first to tag this record!
|
| Summary: | This paper studies the impact of an
increase in the enforcement of labor regulations on
unemployment and inequality, using city level data from
Brazil. We find that stricter enforcement (affecting the
payment of mandated benefits to formal workers) leads to:
higher unemployment, less income inequality, a higher
proportion of formal employment, and a lower formal wage
premium. Our results are consistent with a model where
stricter enforcement causes a contraction in labor demand in
both the formal and informal sectors; and where workers
value mandated benefits highly, so that there is an increase
in the formal sector labor supply, an increase in the
willingness to become unemployed to search for a formal
sector job, and a decrease in labor supply to the informal sector. |
|---|