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Informal wages in an economy with active labor courts

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  • Araujo, Luis
  • Ponczek, Vladimir P.

Abstract

In most developing countries, job regulations and the justice branch interfere on several aspects of labor contracts. Inspired by this fact, we build a model that explores the role of labor courts in the determination of the di¤erence between formal and informal wages. We show that the presence of active labor courts in an environment where labor relations are subject to asymmetries of information reproduces features documented by the empirical literature. The main implications of our model are tested using Brazilian data.

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File URL: http://bibliotecadigital.fgv.br/dspace/bitstream/10438/10006/1/TD%20294%20-%20C-Micro%2012%20-%20Luiz%20Araujo%20e%20Vladimir%20Ponczek.pdf
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Bibliographic Info

Paper provided by Escola de Economia de São Paulo, Getulio Vargas Foundation (Brazil) in its series Textos para discussão with number 294.

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Date of creation: 12 Sep 2012
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Handle: RePEc:fgv:eesptd:294

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