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Enforcement of Labor Regulation and the Labor Market Effects of Trade: Evidence from Brazil

Gabriel Ulyssea () and Vladimir Ponczek ()
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Gabriel Ulyssea: University of Oxford
Vladimir Ponczek: Sao Paulo School of Economics

No 11783, IZA Discussion Papers from Institute for the Study of Labor (IZA)

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.

Keywords: trade; enforcement of labor regulations; informality (search for similar items in EconPapers)
JEL-codes: F16 J46 K31 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dev, nep-int, nep-iue, nep-law and nep-lma
Date: 2018-08
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