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

46 Pages Posted: 17 Sep 2018

See all articles by Gabriel Ulyssea

Gabriel Ulyssea

University of Oxford - Department of Economics

Vladimir P. Ponczek

Getulio Vargas Foundation (FGV) - Sao Paulo School of Economics

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

JEL Classification: F16, J46, K31

Suggested Citation

Ulyssea, Gabriel and Ponczek, Vladimir P., Enforcement of Labor Regulation and the Labor Market Effects of Trade: Evidence from Brazil. IZA Discussion Paper No. 11783, Available at SSRN: https://ssrn.com/abstract=3249897 or http://dx.doi.org/10.2139/ssrn.3249897

Gabriel Ulyssea (Contact Author)

University of Oxford - Department of Economics ( email )

10 Manor Rd
Oxford, OX1 3UQ
United Kingdom

Vladimir P. Ponczek

Getulio Vargas Foundation (FGV) - Sao Paulo School of Economics ( email )

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