Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/79385
Authors: 
Almeida, Rita
Carneiro, Pedro
Year of Publication: 
2006
Series/Report no.: 
cemmap working paper, Centre for Microdata Methods and Practice CWP02/06
Abstract: 
This paper investigates how enforcement of labor regulation affects the firm's use of informal labor and firm performance. Using firm level data on informal employment and firm performance, and administrative data on enforcement of regulation at the city level, we show that in areas where law enforcement is stricter firms employ a smaller amount of informal employment. Furthermore, by reducing the firm's access to unregulated labor, stricter enforcement is also associated with lower labor productivity. We control for different regional and firm characteristics, and we instrument enforcement with a measure of the access of labor inspectors to firms. Taken together, our findings suggest that increased access to labor flexibility significantly improves firm performance.
Subjects: 
Informal Sector , Labor Markets , Regulation , Productivity
JEL: 
J3
J6
O17
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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