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Enforcement of labor regulation and firm size

  • Almeida, Rita
  • Carneiro, Pedro

This paper investigates how enforcement of labor regulation affects firm size and other firm characteristics in Brazil. The authors explore firm level data on employment, capital, and output, city level data for economic city characteristics and new administrative data measuring enforcement of regulation at the city level. Since enforcement may be endogenous, authors instrument this variable with the distance between the city where the firm is located and surrounding enforcement offices, while controlling for a very rich set of city characteristics (such as past levels of informality in the city). The authors present suggestive evidence of the validity of this instrument. The authors find that stricter enforcement of labor regulation constrains firm size.

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Paper provided by The World Bank in its series Social Protection and Labor Policy and Technical Notes with number 43675.

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Date of creation: 01 May 2008
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Handle: RePEc:wbk:hdnspu:43675
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