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Enforcement Matters: The Effective Regulation of Labor

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  • Kanbur, Ravi
  • Ronconi, Lucas

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 cross-country 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

  • Kanbur, Ravi & Ronconi, Lucas, 2016. "Enforcement Matters: The Effective Regulation of Labor," CEPR Discussion Papers 11098, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:11098
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    Cited by:

    1. 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.
    2. Haroon Bhorat & Ravi Kanbur & Benjamin Stanwix & Amy Thornton, 2021. "Measuring Multi‐Dimensional Labour Law Violation with an Application to South Africa," British Journal of Industrial Relations, London School of Economics, vol. 59(3), pages 928-961, September.
    3. Lewandowski, Piotr & Góra, Marek & Lis, Maciej, 2017. "Temporary Employment Boom in Poland: A Job Quality vs. Quantity Trade-off?," IZA Discussion Papers 11012, Institute of Labor Economics (IZA).
    4. Ronconi, Lucas & Kanbur, Ravi & López-Cariboni, Santiago, 2019. "Who Demands Labour (De)Regulation in the Developing World? Insider–Outsider Theory Revisited," IZA Discussion Papers 12831, Institute of Labor Economics (IZA).
    5. Badaoui, Eliane & Walsh, Frank, 2022. "Productivity, non-compliance and the minimum wage," Journal of Development Economics, Elsevier, vol. 155(C).
    6. Kashif Mansoor & Donal O'Neill, 2020. "Minimum Wage Compliance and Household Welfare: An analysis of over 1500 Minimum Wages," Economics Department Working Paper Series n301-20.pdf, Department of Economics, National University of Ireland - Maynooth.
    7. Rodrigo Ceni & Gabriel Merlo, 2021. "Twenty years of job flows in an emerging country," Documentos de Trabajo (working papers) 21-10, Instituto de Economia - IECON.
    8. 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.
    9. Lucas Ronconi, 2019. "Enforcement of labor regulations in developing countries," IZA World of Labor, Institute of Labor Economics (IZA), pages 457-457, March.
    10. Lucas Ronconi & Mercedes Sidders & Benjamin Stanwix, 2016. "The Paradox of Effective Labor Regulation," Working Papers 201605, University of Cape Town, Development Policy Research Unit.
    11. Mansoor, Kashif & O'Neill, Donal, 2021. "Minimum wage compliance and household welfare: An analysis of over 1500 minimum wages in India," World Development, Elsevier, vol. 147(C).
    12. Amrit Amirapu & Michael Gechter, 2020. "Labor Regulations and the Cost of Corruption: Evidence from the Indian Firm Size Distribution," The Review of Economics and Statistics, MIT Press, vol. 102(1), pages 34-48, March.
    13. Salvador Valdés & Samuel Leyton, 2019. "Social insurance contributions: frequency vs. Earnings," Documentos de Trabajo 528, Instituto de Economia. Pontificia Universidad Católica de Chile..
    14. Aditya BHATTACHARJEA, 2021. "Labour market flexibility in Indian manufacturing: A critical survey of the literature," International Labour Review, International Labour Organization, vol. 160(2), pages 197-217, June.
    15. Ham, Andrés, 2018. "The Consequences of Legal Minimum Wages in Honduras," World Development, Elsevier, vol. 102(C), pages 135-157.
    16. 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.
    17. 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.
    18. 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.

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    More about this item

    Keywords

    effective regulation; enforcement; labor market outcomes; labor regulation; legal origin theory;
    All these keywords.

    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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