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Estimating the Causal Effect of Enforcement on Minimum Wage Compliance: The Case of S outh A frica

  • Haroon Bhorat
  • Ravi Kanbur
  • Natasha Mayet

This paper attempts to estimate the causal effect of government enforcement on compliance with minimum wages in South Africa, a country where considerable non-compliance exists. The number of labour inspectors per capita is used as a proxy for enforcement, whilst non-compliance is measured using an index of violation that measures both the proportion of individuals violated, as well as the average depth of individual violation. Due to the potential simultaneity between enforcement and compliance, the number of labour inspectors is instrumented by the number of non-inspectors. The results suggest that there are a variety of factors impacting on violation, including firm-level, sectoral and spatial characteristics. One of the key determinants of violation is found to be the local unemployment rate. However, the number of labour inspectors is found to be insignificant in determining non-compliance.

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File URL: http://hdl.handle.net/10.1111/10.1111/rode.2012.16.issue-4
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Article provided by Wiley Blackwell in its journal Review of Development Economics.

Volume (Year): 16 (2012)
Issue (Month): 4 (November)
Pages: 608-623

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Handle: RePEc:bla:rdevec:v:16:y:2012:i:4:p:608-623
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  1. Steven D. Levitt, 1995. "Using Electoral Cycles in Police Hiring to Estimate the Effect of Policeon Crime," NBER Working Papers 4991, National Bureau of Economic Research, Inc.
  2. Bhorat, Haroon & Kanbur, Ravi & Mayet, Natasha, 2011. "Minimum Wage Violation In South Africa," Working Papers 126534, Cornell University, Department of Applied Economics and Management.
  3. Maloney, William F. & Nunez, Jairo & Cunningham, Wendy & Fiess, Norbert & Montenegro, Claudio & Murrugarra, Edmundo & Santamaria,Mauricio & Sepulveda, Claudia, 2001. "Measuring the impact of minimum wages : evidence from Latin America," Policy Research Working Paper Series 2597, The World Bank.
  4. Lucas Ronconi, 2012. "Globalization, Domestic Institutions, and Enforcement of Labor Law: Evidence from Latin America," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 51(1), pages 89-105, 01.
  5. Lucas Ronconi, 2010. "Enforcement and Compliance with Labor Regulations," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 63(4), pages 719-736, July.
  6. Foster, James & Greer, Joel & Thorbecke, Erik, 1984. "A Class of Decomposable Poverty Measures," Econometrica, Econometric Society, vol. 52(3), pages 761-66, May.
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