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Enforcement of regulation, informal labor and firm performance

Almeida, R.; Carneiro, P.; (2006) Enforcement of regulation, informal labor and firm performance. (cemmap Working Papers CWP02/). Institute for Fiscal Studies: London, UK. Green open access

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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.

Type: Working / discussion paper
Title: Enforcement of regulation, informal labor and firm performance
Open access status: An open access version is available from UCL Discovery
Publisher version: http://www.cemmap.ac.uk/publications.php
Language: English
Keywords: JEL classification: J3, J6, O17. Informal sector, labor markets, regulation, productivity
UCL classification: UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS > Dept of Economics
URI: https://discovery.ucl.ac.uk/id/eprint/14680
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