Abstract
ABSTRACT Labour regulation matters for the economy. But measuring firms’ compliance with this regulation poses significant challenges as inspections, enforcement, or reporting might be correlated to compliance risk factors of each firm. We propose estimating the compliance rate by a randomized controlled trial (RCT) of standard labour inspections. We run the experiment on small and medium firms (SME) in Chile. We estimate a non-compliance sanction rate of 13%. Our results are robust to various alternative estimation methods. Additional results look at the effects of enforcing labour laws, showing no significant differences on firms’ growth; neither on the intensive (employment and sales) nor the extensive margin (exit). Nonetheless, the experiment had limited power for these additional results. Our methods and results matter for the monitoring and enforcement of labour policies.
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