Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/185243 
Year of Publication: 
2018
Series/Report no.: 
IZA Discussion Papers No. 11783
Publisher: 
Institute of Labor Economics (IZA), Bonn
Abstract: 
How does enforcement of labor regulations shape the labor market effects of trade? To tackle this question, we exploit the Brazilian trade liberalization episode and exogenous variation in the intensity of both the trade shock and enforcement across local labor markets. Regions with stricter enforcement observed no increase in informal employment but large disemployment effects. Regions with weaker enforcement had no employment losses but substantial increases in informality. All effects are concentrated on unskilled workers, with no effects on skilled workers. The results indicate that informality acts as a buffer that reduces trade-induced adjustment costs in the labor market.
Subjects: 
trade
enforcement of labor regulations
informality
JEL: 
F16
J46
K31
Document Type: 
Working Paper

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