An evaluation of a mandatory profit-sharing reform in Peru, using quasi-experimental methods

Edinson Tolentino ()
Additional contact information
Edinson Tolentino: Universidad Privada del Norte

Economia e Politica Industriale: Journal of Industrial and Business Economics, 2022, vol. 49, issue 2, No 5, 313-334

Abstract: Abstract This study identifies a causal effect of the labour reform given by Peruvian Legislative Decree N 892 on firm performance. The labour reform states that firms must share profits with their employees when they have more than 20 fixed employees at the end of the year. This discontinuity provides an exogenous source of variation below and above the threshold and allows to implement a quasi-experimental method. At firm level, the National Institute of Statistics and Informatics (INEI) provided the data called the Annual Economic Survey (AES). The main findings of this study were that this law reduces the return on investment of a firm due to rent sharing, which implies that they make less investment and hire more non-permanent employees (not mandatory rent sharing), which decreases the level of productivity across firms. Therefore, according to regression discontinuity and difference in difference approaches, it is estimated that the labour reform policy reduced investment by 16.4% and 15.6%, respectively, given the cut-off threshold of 20 employees. Moreover, the magnitude of the effect on temporary employees induces firms to hire an average differential of temporary employees ranging from 14 to 40% among firms with more than 20 employees instead of less than 20 employees.

Keywords: Productivity; Labor reform; size distortion (search for similar items in EconPapers)
JEL-codes: J41 J51 J54 J58 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://link.springer.com/10.1007/s40812-021-00193-y Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:epolin:v:49:y:2022:i:2:d:10.1007_s40812-021-00193-y

Ordering information: This journal article can be ordered from
http://www.springer.com/economics/journal/40812

DOI: 10.1007/s40812-021-00193-y

Access Statistics for this article

Economia e Politica Industriale: Journal of Industrial and Business Economics is currently edited by C. Cambini, M.G. Colombo, L. Piscitello, L. Rondi and A. Zanfei

More articles in Economia e Politica Industriale: Journal of Industrial and Business Economics from Springer, Associazione Amici di Economia e Politica Industriale
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().