Enforcement of Labor Regulation, Informal Labor, and Firm Performance

This paper investigates how enforcement of labor regulation affects the firm's use of informal employment and its impact on firm performance. Using firm level data on informal employment and firm performance, and administrative data on enforcement of regulation at the city level, the authors show that in areas where law enforcement is stricter firms employ a smaller amount of informal employment. Furthermore, by reducing the firm's access to unregulated labor, stricter enforcement also decreases average wages, productivity, and investment. The results are robust to several specification changes, and to instrumenting enforcement with (1) measures of access of labor inspectors to firms, and (2) measures of general law enforcement in the area where the firm is located.

Bibliographic Details

Main Authors:	Carneiro, Pedro, Almeida, Rita
Language:	English
Published:	World Bank, Washington, DC 2005-10
Subjects:	AVERAGE WAGE, AVERAGE WAGES, CITIES, DISMISSAL, DISMISSALS, DISMISSED WORKERS, EMPLOYEE, EMPLOYERS, EMPLOYMENT EFFECTS, EMPLOYMENT LAW, EXOGENOUS VARIABLES, FIRING, FIRING COSTS, FIRM LEVEL, FIRM PERFORMANCE, FOREIGN OWNERSHIP, HIGH WAGE, HIRING, HOURS OF WORK, ILLEGAL EMPLOYMENT, INFORMAL EMPLOYMENT, INFORMAL LABOR MARKETS, INFORMAL SECTOR, JOB SECURITY, JOB SECURITY REGULATION, JOB TENURE, JOBS, LABOR CONTRACT, LABOR CONTRACTS, LABOR COSTS, LABOR DEMAND, LABOR FORCE, LABOR LAW, LABOR MARKET, LABOR MARKET INSTITUTIONS, LABOR MARKET REGULATION, LABOR MARKET REGULATIONS, LABOR MARKETS, LABOR PRODUCTIVITY, LABOR REGULATION, LABOR REGULATIONS, LARGE CITIES, LAWS, MINIMUM WAGES, PAID WORKERS, PERMANENT EMPLOYMENT, PERMANENT WORKERS, PRESENT EVIDENCE, PREVIOUS SECTION, PRIVATE SECTOR, PRIVATE SURVEY FIRM, PRODUCTIVITY GROWTH, PRODUCTIVITY REGRESSIONS, RETIREMENT, SEVERANCE PAYMENT, SEVERANCE PAYMENTS, SOCIAL PROTECTION, SOCIAL SECURITY, SUPPLIERS, TEMPORARY EMPLOYMENT, TEMPORARY WORKERS, TOTAL EMPLOYMENT, TRANSPORT, UNEMPLOYMENT, UNEMPLOYMENT BENEFITS, UNEMPLOYMENT INSURANCE, UNIONS, WAGE RATE, WORK IN PROGRESS, WORK LOAD, WORK PERMIT, WORKER, WORKERS, WORKING, WORKING HOURS,
Online Access:	http://documents.worldbank.org/curated/en/2005/10/6350158/enforcement-labor-regulation-informal-labor-firm-performance https://hdl.handle.net/10986/8409
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