Abstract
The frequency of labor inspections in Brazil increased in the late 1990s. In the years that followed, between 2003 and 2007, formal employment expanded significantly in the country. This paper examines whether these city-level changes in labor inspections could be a significant factor contributing to the increase in the number of formal labor contracts at the city level. We exploit unique administrative data on formal employment on different indicators for job and worker flows—including job creation, destruction, reallocation, accessions, and separations—between 1996 and 2006, and on the intensity of labor inspections, both at the city level. The results show that increases in the enforcement of labor market regulations at the subnational level led to an increase in gross and net formal job creation rates and accession rates in a period when the Brazilian GDP and formal employment were growing and informality rates were declining. In contrast, increases in enforcement of regulations are not significantly correlated with changes in the rate of job destruction. This finding is robust to different specifications and is consistent with a model where formal jobs become more attractive to workers when enforcement of different types of labor regulations increases.JEL ClassificationJ21, J63, E24, H80, C23
Highlights
As more micro-level data becomes available, the understanding of labor market adjustment has benefited considerably from a literature looking into jobs or worker flows as the main outcome variables.1 This new approach has unveiled new results on labor market adjustments to changes in the environment such as business cycle fluctuations (Shimer 2012), or minimum wage shocks (Brochu and Green 2013)
All else being constant, cities facing an increase in the enforcement of labor market regulations tend to have higher rates of worker flows in both margins: accessions and separations
7 Conclusions In this paper, we explore the relationship between the enforcement of labor market regulations and job and worker flow measures
Summary
As more micro-level data becomes available, the understanding of labor market adjustment has benefited considerably from a literature looking into jobs or worker flows as the main outcome variables. This new approach has unveiled new results on labor market adjustments to changes in the environment such as business cycle fluctuations (Shimer 2012), or minimum wage shocks (Brochu and Green 2013). As more micro-level data becomes available, the understanding of labor market adjustment has benefited considerably from a literature looking into jobs or worker flows as the main outcome variables.. As more micro-level data becomes available, the understanding of labor market adjustment has benefited considerably from a literature looking into jobs or worker flows as the main outcome variables.1 This new approach has unveiled new results on labor market adjustments to changes in the environment such as business cycle fluctuations (Shimer 2012), or minimum wage shocks (Brochu and Green 2013). In spite of the importance of the topic, the literature has not been conclusive about the relation between enforcement of labor regulations and rates of job flow in emerging economies.. Enforcement can directly impact job creation though the regularization of informal jobs at the plant level
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