Abstract
This paper explores microdata from Argentine household surveys to analyze how changes in the enforcement of labor regulations affect the compliance level and other labor outcomes among men and women. Using information of the highly decentralized labor inspection system in Argentina, I construct an enforcement measure with variation at the province, sector, and time level (share of inspected firms) which I instrument using a measure of the arrival cost of labor inspectors to the firms. The main findings reveal that when enforcement increases, the compliance with mandated benefits and formal wages increase among men, while informal wages decline. Among women, the compliance level declines jointly with informal wages. These heterogenous impacts are explained by labor regulations that make formal and informal men more substitutable in the production process than formal and informal women.
Highlights
In Argentina, labor market regulations are extensive and the social security system has a de jure universal coverage
Laid-off women move to informal firms where they do not receive mandated benefits and self-employed women become informal wage employees, probably attracted by the probability of obtaining better employment conditions in the future due to higher enforcement
7.3 Composition of employment by economic sector The heterogenous results for men and women may be reflecting the differential impact of labor regulations on the substitutability of formal and informal workers and the fact that men and women are employed in different sectors
Summary
In Argentina, labor market regulations are extensive and the social security system has a de jure universal coverage. The increased labor costs resulting from stricter enforcement can lead firms to make additional adjustments which can differ among men and women They can reduce hourly wages or decrease the level of non-mandated benefits, such as meals and housing. This paper is related to studies analyzing the impacts of labor regulations on labor market outcomes in a broad sense, i.e., level of compliance with the labor law and other labor outcomes, in a withincountry context These studies have found that stricter labor regulations are associated with reductions in output, employment, investment, and productivity in the formal sector, declines in job turnover, and output increases in the informal sector (Besley and Burgess 2004; Mondino and Montoya 2004; Kugler 2004; Micco and Pagés 2006). Inside the literature on labor informality, this paper is close to studies conceptualizing the informal sector as a non-homogenous sector, where easy entry and low wage activities coexist with other activities that have barriers to entry, and where the linkages of these two types of activities with the formal sector is very different (Fields 2005)
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