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Enforcement Matters: The Effective Regulation Of Labor

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  • Ronconi, Lucas
  • Kanbur, Ravi

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 crosscountry 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.

Suggested Citation

  • Ronconi, Lucas & Kanbur, Ravi, 2016. "Enforcement Matters: The Effective Regulation Of Labor," Working Papers 250025, Cornell University, Department of Applied Economics and Management.
    • Handle: RePEc:ags:cudawp:250025
    DOI: 10.22004/ag.econ.250025
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    File URL: https://ageconsearch.umn.edu/record/250025/files/Cornell-Dyson-wp1603.pdf
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    References listed on IDEAS

    as
    1. Juan C. Botero & Simeon Djankov & Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer, 2004. "The Regulation of Labor," The Quarterly Journal of Economics, Oxford University Press, vol. 119(4), pages 1339-1382.
    2. Feldmann, Horst, 2009. "The unemployment effects of labor regulation around the world," Journal of Comparative Economics, Elsevier, vol. 37(1), pages 76-90, March.
    3. Haroon BHORAT & Ravi KANBUR & Natasha MAYET, 2012. "Minimum wage violation in South Africa," International Labour Review, International Labour Organization, vol. 151(3), pages 277-287, September.
    4. Friedrich Schneider & Andreas Buehn & Claudio E. Montenegro, 2011. "Shadow Economies All Over the World: New Estimates for 162 Countries from 1999 to 2007," Chapters, in: Friedrich Schneider (ed.),Handbook on the Shadow Economy, chapter 1, Edward Elgar Publishing.
    5. Andrei Shleifer & Florencio Lopez-de-Silanes & Rafael La Porta, 2008. "The Economic Consequences of Legal Origins," Journal of Economic Literature, American Economic Association, vol. 46(2), pages 285-332, June.
    6. Barro, Robert J. & Lee, Jong Wha, 2013. "A new data set of educational attainment in the world, 1950–2010," Journal of Development Economics, Elsevier, vol. 104(C), pages 184-198.
    7. Lucas Ronconi, 2010. "Enforcement and Compliance with Labor Regulations in Argentina," ILR Review, Cornell University, ILR School, vol. 63(4), pages 719-736, July.
    8. James J. Heckman & Carmen Pagés, 2004. "Law and Employment: Lessons from Latin America and the Caribbean," NBER Books, National Bureau of Economic Research, Inc, number heck04-1, June.
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    10. Gary S. Becker, 1974. "Crime and Punishment: An Economic Approach," NBER Chapters, in: Essays in the Economics of Crime and Punishment, pages 1-54, National Bureau of Economic Research, Inc.
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    23. Amengual, Matthew, 2010. "Complementary Labor Regulation: The Uncoordinated Combination of State and Private Regulators in the Dominican Republic," World Development, Elsevier, vol. 38(3), pages 405-414, March.
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    Citations

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    Cited by:

    1. Lucas Ronconi & Ravi Kanbur & Santiago López-Cariboni, 2019. "Who demands labour (de)regulation in the developing world?: Insider-outsider theory revisited," WIDER Working Paper Series wp-2019-90, World Institute for Development Economic Research (UNU-WIDER).
    2. Kashif Mansoor & Donal O'Neill, 2020. "Minimum Wage Compliance and Household Welfare: An analysis of over 1500 Minimum Wages," Economics, Finance and Accounting Department Working Paper Series n301-20.pdf, Department of Economics, Finance and Accounting, National University of Ireland - Maynooth.
    3. Haroo Bhorat & Ravi Kanbur & Benjamin Stanwix, 2019. "Compliance with labor laws in developing countries," IZA World of Labor, Institute of Labor Economics (IZA), pages 1-80, June.
    4. Ham, Andrés, 2018. "The Consequences of Legal Minimum Wages in Honduras," World Development, Elsevier, vol. 102(C), pages 135-157.
    5. Marek Gora & Piotr Lewandowski & Maciej Lis, 2017. "Temporary employment boom in Poland – a job quality vs. quantity trade-off?," IBS Working Papers 04/2017, Instytut Badan Strukturalnych.
    6. Yolova, Galina & Andreeva, Andriyana, 2019. "Принципите На Свобода На Труда И Свобода На Договаряне [The principles of freedom of labour and freedom to negotiate in context of flexible forms of employment]," MPRA Paper 101066, University Library of Munich, Germany.
    7. Rita Almeida & Lucas Ronconi, 2016. "Labor Inspections in the Developing World: Stylized Facts from the Enterprise Survey," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 55(3), pages 468-489, July.
    8. Servaas Storm, 2019. "Labor Laws and Manufacturing Performance in India: How Priors Trump Evidence and Progress Gets Stalled," Working Papers Series 90, Institute for New Economic Thinking.
    9. Soundararajan, Vidhya, 2019. "Heterogeneous effects of imperfectly enforced minimum wages in low-wage labor markets," Journal of Development Economics, Elsevier, vol. 140(C), pages 355-374.
    10. Lucas Ronconi, 2019. "Enforcement of labor regulations in developing countries," IZA World of Labor, Institute of Labor Economics (IZA), pages 457-457, March.
    11. Lucas Ronconi & Mercedes Sidders & Benjamin Stanwix, 2016. "The Paradox of Effective Labor Regulation," Working Papers 201605, University of Cape Town, Development Policy Research Unit.

    More about this item

    Keywords

    Labor and Human Capital; Marketing;

    JEL classification:

    • J88 - Labor and Demographic Economics - - Labor Standards - - - Public Policy
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law

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