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

  title={Inequality and Employment in a Dual Economy : Enforcement of Labor Regulation in Brazil},
  author={Rita Almeida and Pedro Gonçalves da Silva Carneiro},
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 both the… CONTINUE READING

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