IDEAS home Printed from
MyIDEAS: Login to save this paper or follow this series

Inequality and Employment in a Dual Economy: Enforcement of Labor Regulation in Brazil

  • Almeida, Rita K.


    (World Bank)

  • Carneiro, Pedro


    (University College London)

This paper studies the impact of an increase in the enforcement of labor regulations on unemployment and inequality, using city level data from Brazil. We find that stricter enforcement (affecting the payment of mandated benefits to formal workers) leads to: higher unemployment, less income inequality, a higher proportion of formal employment, and a lower formal wage premium. Our results are consistent with a model where stricter enforcement causes a contraction in labor demand in the formal sector; and where workers value mandated benefits highly, so that there is an increase in the formal sector labor supply, an increase in the willingness to become unemployed to search for a formal sector job, and a decrease in labor supply to the informal sector.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: no

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 3094.

in new window

Length: 49 pages
Date of creation: Oct 2007
Date of revision:
Handle: RePEc:iza:izadps:dp3094
Contact details of provider: Postal: IZA, P.O. Box 7240, D-53072 Bonn, Germany
Phone: +49 228 3894 223
Fax: +49 228 3894 180
Web page:

Order Information: Postal: IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Raghuram G. Rajan & Luigi Zingales, 1996. "Financial Dependence and Growth," NBER Working Papers 5758, National Bureau of Economic Research, Inc.
  2. Ricardo J Caballero & Kevin N Cowan & Eduardo M.R.A. Engel & Alejandro Micco, 2007. "Effective Labor Regulation and Microeconomic Flexibility," Levine's Bibliography 321307000000000990, UCLA Department of Economics.
  3. Bartelsman, Eric & Haltiwanger, John C. & Scarpetta, Stefano, 2004. "Microeconomic Evidence of Creative Destruction in Industrial and Developing Countries," IZA Discussion Papers 1374, Institute for the Study of Labor (IZA).
  4. Lars Ljungqvist & Thomas J. Sargent, 1996. "The European Unemployment Dilemma," EUI-RSCAS Working Papers 36, European University Institute (EUI), Robert Schuman Centre of Advanced Studies (RSCAS).
  5. Almeida, Rita & Carneiro, Pedro, 2009. "Enforcement of labor regulation and firm size," Journal of Comparative Economics, Elsevier, vol. 37(1), pages 28-46, March.
  6. James Albrecht & Lucas Navarro & Susan Vroman, 2009. "The Effects of Labour Market Policies in an Economy with an Informal Sector," Economic Journal, Royal Economic Society, vol. 119(539), pages 1105-1129, 07.
  7. Jose Scheinkman & Aureo de Paula, 2007. "The Informal Sector," 2007 Meeting Papers 117, Society for Economic Dynamics.
  8. Ricardo Caballero G. & Eduardo Engel G. & Alejandro Micco A., 2004. "Microeconomic Flexibility in Latin America," Journal Economía Chilena (The Chilean Economy), Central Bank of Chile, vol. 7(2), pages 5-26, August.
  9. Amaral, Pedro S. & Quintin, Erwan, 2006. "A competitive model of the informal sector," Journal of Monetary Economics, Elsevier, vol. 53(7), pages 1541-1553, October.
  10. Alejandro Micco - Carmen Pages, 2004. "Employment Protection and Gross Job Flows1," Econometric Society 2004 Latin American Meetings 295, Econometric Society.
  11. Loayza, Norman V. & Oviedo, Ana Maria & Serven, Luis, 2005. "The impact of regulation on growth and informality - cross-country evidence," Policy Research Working Paper Series 3623, The World Bank.
  12. Sebastian Galiani & Federico Weinschelbaum, 2012. "Modeling Informality Formally: Households And Firms," Economic Inquiry, Western Economic Association International, vol. 50(3), pages 821-838, 07.
  13. Fields, Gary S., 1975. "Rural-urban migration, urban unemployment and underemployment, and job-search activity in LDCs," Journal of Development Economics, Elsevier, vol. 2(2), pages 165-187, June.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:iza:izadps:dp3094. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mark Fallak)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.