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

Author

Listed:
  • Ulyssea, Gabriel

    () (University of Oxford)

  • Ponczek, Vladimir

    () (Sao Paulo School of Economics)

Abstract

How does enforcement of labor regulations shape the labor market effects of trade? To tackle this question, we exploit the Brazilian trade liberalization episode and exogenous variation in the intensity of both the trade shock and enforcement across local labor markets. Regions with stricter enforcement observed no increase in informal employment but large disemployment effects. Regions with weaker enforcement had no employment losses but substantial increases in informality. All effects are concentrated on unskilled workers, with no effects on skilled workers. The results indicate that informality acts as a buffer that reduces trade-induced adjustment costs in the labor market.

Suggested Citation

  • Ulyssea, Gabriel & Ponczek, Vladimir, 2018. "Enforcement of Labor Regulation and the Labor Market Effects of Trade: Evidence from Brazil," IZA Discussion Papers 11783, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp11783
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    References listed on IDEAS

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    More about this item

    Keywords

    trade; enforcement of labor regulations; informality;

    JEL classification:

    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • J46 - Labor and Demographic Economics - - Particular Labor Markets - - - Informal Labor Market
    • K31 - Law and Economics - - Other Substantive Areas of Law - - - Labor Law

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