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

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  • Vladimir Ponczek
  • Gabriel Ulyssea

Abstract

How does enforcement of labour regulations shape the labour market effects of trade? We combine local economic shocks generated by the unilateral trade liberalisation in Brazil and enforcement variation across regions to show that regions with stricter enforcement observed: (i) lower informality; (ii) larger losses in overall employment; (iii) greater reductions in the number of formal plants. Regions with weaker enforcement experienced opposite effects. All these effects are concentrated on low-skill workers. Our results indicate that greater flexibility introduced by informality allows both formal firms and low-skill workers to cope better with adverse labour market shocks.

Suggested Citation

  • Vladimir Ponczek & Gabriel Ulyssea, 2022. "Enforcement of Labour Regulation and the Labour Market Effects of Trade: Evidence from Brazil," The Economic Journal, Royal Economic Society, vol. 132(641), pages 361-390.
    • Handle: RePEc:oup:econjl:v:132:y:2022:i:641:p:361-390.
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    References listed on IDEAS

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    2. Hernando Gutierrez, Luis & Rodriguez-Lesmes, Paul, 2023. "Productivity gaps at formal and informal microfirms," World Development, Elsevier, vol. 165(C).
    3. Camila Cisneros-Acevedo & Alessandro Ruggieri, 2022. "Firms, policies, informality, and the labour market," Discussion Papers 2022-11, University of Nottingham, GEP.
    4. Maria Bas & Pamela Bombarda, 2023. "Input-Trade Liberalization and Formal Employment: Evidence from Mexico," Documents de travail du Centre d'Economie de la Sorbonne 23007, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
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    7. Dix-Carneiro, Rafael & Kovak, Brian K., 2023. "Globalization and Inequality in Latin America," IZA Discussion Papers 16363, Institute of Labor Economics (IZA).
    8. Heckl, Pia, 2024. "Import Shocks and Gendered Labor Market Responses: Evidence from Mexico," Labour Economics, Elsevier, vol. 88(C).
    9. Pamela Bombarda & Maria Bas, 2023. "Foreign Technology and Informal Employment: Evidence from Mexico," THEMA Working Papers 2023-02, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
    10. Andrea Otero-Cortés & Alexander Villegas Mendoza & Oriana Álvarez Vos & Karina Acosta, 2023. "Caracterización de la oferta y demanda de trabajo en la Región Caribe," Documentos de trabajo sobre Economía Regional y Urbana 318, Banco de la Republica de Colombia.
    11. Berlinski, Samuel & Gagete-Miranda, Jessica, 2024. "Enforcement Spillovers under Different Networks: The Case of Quotas for Persons with Disabilities in Brazil," IDB Publications (Working Papers) 13681, Inter-American Development Bank.

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