Labor Market Regulation and Informality

Luiz Brotherhood (), Daniel Da Mata, Nezih Guner, Philipp Kircher () and Cezar Santos ()
Additional contact information
Luiz Brotherhood: Universitat de Barcelona & BEAT, https://web.ub.edu/
Philipp Kircher: Cornell University, https://www.cornell.edu/
Cezar Santos: Inter-American Development Bank & CEPR, https://www.iadb.org/

Working Papers from CEMFI

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.

Keywords: Informality; labor market regulation; firm dynamics; developing countries. (search for similar items in EconPapers)
JEL-codes: H2 J1 J2 L1 (search for similar items in EconPapers)
Date: 2023-12
New Economics Papers: this item is included in nep-dev, nep-dge, nep-iue and nep-lma
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.cemfi.es/ftp/wp/2308.pdf (application/pdf)

Related works:
Working Paper: Labor Market Regulation and Informality (2024)
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:cmf:wpaper:wp2023_2308

Access Statistics for this paper

More papers in Working Papers from CEMFI Contact information at EDIRC.
Bibliographic data for series maintained by Araceli Requerey ().