Enforcement Matters: The Effective Regulation of Labor

32 Pages Posted: 17 Feb 2016

See all articles by Ravi Kanbur

Ravi Kanbur

Cornell University; Centre for Economic Policy Research (CEPR); IZA Institute of Labor Economics

Lucas Ronconi

Centro de Investigación y Acción Social & CONICET

Date Written: February 2016

Abstract

This paper provides, to our knowledge for the first time, cross-country measures of enforcement of labor law across almost every country in the world. The distinction between de jure and de facto regulation is well understood in theory, but almost never implemented in cross-country empirical work because of lack of data. As a result, influential papers like the one by Botero et. al. (2004) published in the Quarterly Journal of Economics, which have shaped the policy debate by finding strong negative consequences of labor regulation on labor market outcomes, are based entirely on measures of de jure stringency of regulations. We show that this neglect of regulation enforcement matters. There is, on average, a negative correlation between the stringency of labor regulation and the intensity of its enforcement. The strong results of Botero et. al. (2004) on the consequences of labor regulation, and the hypotheses of La Porta et. al (2008) on the legal origin theory of regulation stringency, no longer hold for effective labor regulation.

Keywords: effective regulation, enforcement, labor market outcomes, labor regulation, legal origin theory

JEL Classification: J88, K42

Suggested Citation

Kanbur, Ravi and Ronconi, Lucas, Enforcement Matters: The Effective Regulation of Labor (February 2016). CEPR Discussion Paper No. DP11098. Available at SSRN: https://ssrn.com/abstract=2733071

Ravi Kanbur (Contact Author)

Cornell University ( email )

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HOME PAGE: http://www.kanbur.dyson.cornell.edu

Centre for Economic Policy Research (CEPR)

London
United Kingdom

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Lucas Ronconi

Centro de Investigación y Acción Social & CONICET ( email )

Av. Callao 542
Buenos Aires, 1022
Argentina

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