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

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  • Vladimir Ponczek
  • Gabriel Ulyssea

Abstract

How does enforcement of labour regulations shape the labour market effects of trade? We combine local economic shocks generated by the unilateral trade liberalisation in Brazil and enforcement variation across regions to show that regions with stricter enforcement observed: (i) lower informality; (ii) larger losses in overall employment; (iii) greater reductions in the number of formal plants. Regions with weaker enforcement experienced opposite effects. All these effects are concentrated on low-skill workers. Our results indicate that greater flexibility introduced by informality allows both formal firms and low-skill workers to cope better with adverse labour market shocks.

Suggested Citation

  • Vladimir Ponczek & Gabriel Ulyssea, 2022. "Enforcement of Labour Regulation and the Labour Market Effects of Trade: Evidence from Brazil," The Economic Journal, Royal Economic Society, vol. 132(641), pages 361-390.
    • Handle: RePEc:oup:econjl:v:132:y:2022:i:641:p:361-390.
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    References listed on IDEAS

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    7. Dix-Carneiro, Rafael & Kovak, Brian K., 2023. "Globalization and Inequality in Latin America," IZA Discussion Papers 16363, Institute of Labor Economics (IZA).
    8. Pamela Bombarda & Maria Bas, 2023. "Foreign Technology and Informal Employment: Evidence from Mexico," THEMA Working Papers 2023-02, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
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