Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/309169 
Year of Publication: 
2024
Series/Report no.: 
IDB Working Paper Series No. IDB-WP-1646
Publisher: 
Inter-American Development Bank (IDB), Washington, DC
Abstract: 
This paper investigates informal employment in Brazil's highly regulated labor market, focusing on the intensive margin of informality within formal firms. Using a comprehensive dataset of labor audits conducted from 1997 to 2012, we find that formal firms caught with informal workers face sustained slower growth. Informal workers are found across firms of all sizes, and their characteristics closely resemble those of formal employees. Building on these empirical findings, we develop a dynamic general equilibrium model where firms balance the flexibility of informality against potential costs. Our framework can be used to explore government policy implications and to examine the impact of audit strategies on informality, output, and workers welfare.
Subjects: 
Informality
Labor market regulation
Firm dynamics
Developingcountries
JEL: 
H2
J1
J2
L1
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Working Paper

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