Enforcement and Compliance with Labor Regulations in Argentina

Ronconi, Lucas

doi:10.1177/001979391006300409

Cited by 136 publications

(122 citation statements)

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“…Alm et al 1992, Andreoni et al, 1998. Several more recent non-experimental studies in developing countries have found evidence that the degree of enforcement matters for labor informality (Ronconi, 2007;Almeida and Carneiro, 2012), but there is no reliable evidence we are aware of on the impacts of enforcement on firm informality.…”

Section: Introductionmentioning

confidence: 90%

A Helping Hand or the Long Arm of the Law? Experimental Evidence on What Governments Can Do to Formalize Firms

Andrade¹,

McKenzie²

2013

Policy Research Working Papers

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. www.econstor.eu Many governments have spent much of the past decade trying to extend a helping hand to informal businesses by making it easier and cheaper for them to formalize. Much less effort has been devoted to raising the costs of remaining informal, through increasing enforcement of existing regulations. We conducted a field experiment in Belo Horizonte, Brazil, in order to test which government actions work in getting informal firms to register. Firms were randomized to a control group or one of four treatment groups: the first received information about how to formalize; the second received this information and free registration costs along with the use of an accountant for a year; the third group was assigned to receive an enforcement visit from a municipal inspector; while the fourth group was assigned to have a neighboring firm receive an enforcement visit to see if enforcement has spillovers. We find zero or negative impacts of information and free cost treatments, and a significant but small increase in formalization from inspections. Our LATE estimates of the impact of actually receiving an inspection are much bigger, giving a 21 to 27 percentage point increase in the likelihood of formalizing. The results show most informal firms won't formalize unless forced to do so, suggesting formality offers little private benefit to them, but the tax revenue benefits to the governments of bringing firms of this size into the formal system more than offset the costs of inspections. Terms of use: Documents in D I S C U S S I O N P A P E R S E R I E SJEL Classification: O17, O12, C93, D21, L26

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Section: Introductionmentioning

confidence: 90%

A Helping Hand or the Long Arm of the Law? Experimental Evidence on What Governments Can Do to Formalize Firms

Andrade¹,

McKenzie²

2013

Policy Research Working Papers

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“…I expect the usual forces analyzed by other papers to be at play here -the deterrence effect of labor inspections and the movement of workers to the informal sector of the economy where firms are not inspected (Ronconi, 2010;Bhorat et al 2012;Almeida and Carneiro, 2012;. However, the design of labor market regulations in Peru jointly to a scheme of penalties for violations to the labor rules that depends on the size of the firms add a margin of adjustment not analyzed before.…”

Section: Introductionmentioning

confidence: 90%

“…These regional variables are included to control for characteristics that can be correlated with the level of enforcement and can affect the level of compliance as well, like the regional business and political cycle and the development level (Piore and Schrank, 2008;Ronconi, 2010;Murillo et al, 2011;Ronconi, 2012). These variables are the fiscal result as a percentage of total incomes, the logarithm of the amount of per capita money lent by the banking system to the private sector, the logarithm of the per capita MWh of electricity consumed, the regional unemployment rate, the logarithm of the average per capita household income, the share of poor households receiving food programs, the Gini coefficient of the per capita household income, and the share of precarious dwellings.…”

Section: Empirical Modelmentioning

confidence: 99%

“…The large non-compliance level with the labor law especially in developing countries, has led to the emergence of studies emphasizing the importance of enforcement of labor regulation. Among the studies analyzing country-specific experiences, the evidence indicates that higher enforcement of the labor law increases the compliance with labor market regulations (Ronconi, 2010;Almeida and Carneiro, 2012; or does not generate any effect (Bhorat et al, 2012), increases the compliance among men and reduces the compliance among women (Viollaz, 2016), reduces firms' size and possibly productivity (Almeida and Carneiro, 2009), decreases job creation and increases job destruction (Almeida and Poole, 2013), reduces de provision of non-mandated benefits , and generates wage adjustments -mainly reductions of formal wages at the top of the wage distribution and increases of informal wages (Almeida and Carneiro, 2012;. Regarding the effect of the degree of enforcement on the level of compliance, the channels analyzed by this literature have been the deterrence effect of labor inspections and the movement of displaced workers to the informal sector of the economy.…”

Section: Introductionmentioning

confidence: 99%

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Are Labor Inspections Protecting Workers' Rights? Adding the Evidence from Size-based Labor Regulations and Fines in Peru

Viollaz¹

2016

International Labour Review

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This paper analyzes how changes in the enforcement of labor regulations impact on the compliance rate in a context where the labor rules and the characteristics of the labor inspection system differ by firm size. In addition to the channels analyzed in the existing literature -the deterrence effect of labor inspections and the movement of displaced workers into the informal sector, this paper adds a margin of adjustment not analyzed before: firms can reduce their size to take advantage of lower penalties for violating the labor rules and/or less stringent regulations. I analyze empirically which forces have dominated for workers employed in firms of different size in Peru during [2008][2009][2010][2011][2012][2013]. I measure the enforcement of labor regulations as the number of labor inspections per hundred workers at the regional level, and I instrument it using a measure of the arrival cost of labor inspectors to the firms. The findings reveal that the degree of enforcement had little impact on the compliance with labor regulations. The effect of firms reducing their size to enjoy lower fines and/or less stringent regulations was small in magnitude and the direction of the effect was not clear. The general lack of effect of the enforcement measure on the compliance with the labor rules indicates that the labor inspection system is not effective in Peru, either because it is not able to generate the incentives to comply with labor regulations (e.g. because of lack of resources) or because it fails to overcome the consequences of the adjustment process associated to an increase in the compliance level (e.g. displaced workers moving into the informal sector of the economy).

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“…Several studies attempt to measure the extent and depth of noncompliance with a number of legally mandated requirements such as minimum wages, maximum working hours, occupational health and safety, and social security coverage. Research shows that noncompliance with labor regulations is pervasive, particularly in less developed countries (Bhorat et al, 2012;Kanbur et al, 2013;Rani et al 2013;Ronconi, 2010). 2 There is, however, debate about the welfare implications of this fact.…”

Section: Introductionmentioning

confidence: 99%