This paper investigates how enforcement of labor regulation affects the firm's use of informal employment and its impact on firm performance. Using firm level data on informal employment and firm performance, and administrative data on enforcement of regulation at the city level, we show that in...

Enforcement of labor regulations in the formal sector may drive workers to informality because they increase the costs of formal labor. But better compliance with mandated benefits makes it attractive to be a formal employee. We show that, in locations with frequent inspections workers pay for...

Labor inspection procedures in Brazil went through important changes in several dimensions from late 90s to mid 2000, improving the procedures efficiency. In the subsequent period formal employmentexpanded significantly. The aim of this paper is to identify whether the first fact influenced the...

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...

The frequency of labor inspections in Brazil increased in the late 1990s. In the years that followed, between 2003 and 2007, formal employment expanded significantly in the country. This paper examines whether these city-level changes in labor inspections could be a significant factor...