Mandated Benefits, Employment, and Inequality in a Dual Economy

Almeida, Rita ; Carneiro, Pedro

关键词: ACCESS TO MARKETS;    ACCESSIBILITY;    ACCOUNTING;    AGGREGATE PRODUCTIVITY;    AGGREGATE PRODUCTIVITY GROWTH;   

DOI  :  10.1596/1813-9450-5119
RP-ID  :  WPS5119

学科分类：社会科学、人文和艺术（综合）

来源: World Bank Open Knowledge Repository

【 摘 要 】

This paper studies the effect ofenforcing labor regulation in an economy with a dual labormarket. The analysis uses data from Brazil, a country with alarge informal sector and strict labor law, whereenforcement affects mainly the degree of compliance withmandated benefits (severance pay and health and safetyconditions) in the formal sector, and the registration ofinformal workers. The authors find that stricter enforcementleads to higher unemployment but lower income inequality.They also show that, at the top of the formal wagedistribution, workers bear the cost of mandated benefits byreceiving lower wages. Wage rigidity (due, say, to theminimum wage) prevents this downward adjustment at thebottom of the income distribution. As a result, formalsector jobs at the bottom of the wage distribution becomemore attractive, inducing the low-skilled self-employed tosearch for formal jobs.