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Title:Enforcement of labor regulation and informality PDF Logo
Authors:Almeida, Rita
Carneiro, Pedro
Issue Date:2011
Series/Report no.:cemmap working paper CWP29/11
Abstract:Enforcement of labor regulations in the formal sector may drive workers to informality because they increase the costs of formal labor. But better compliance with mandated benefits makes it attractive to be a formal employee. We show that, in locations with frequent inspections workers pay for mandated benefits by receiving lower wages. Wage rigidity prevents downward adjustment at the bottom of the wage distribution. As a result, lower paid formal sector jobs become attractive to some informal workers, inducing them to want to move to the formal sector.
Persistent Identifier of the first edition:doi:10.1920/wp.cem.2011.2911
Document Type:Working Paper
Appears in Collections:cemmap working papers, Centre for Microdata Methods and Practice, Institute for Fiscal Studies (IFS)

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