Enforcement and Compliance with Labor Regulations

Abstract

The author empirically analyzes the effect of government enforcement on compliance with labor regulations in Argentina, a country where only half of the workforce receives all the benefits to which they are legally entitled. Constructing a panel data set of the period 1995–2002 across provinces and using the number of labor inspectors per capita as a proxy for enforcement, he investigates the extent to which employers comply with six employment and social security regulations: minimum wage, maximum hours, paid vacation time, annual extra monthly wage, workers’ compensation insurance, and health insurance. Because of potential simultaneity between enforcement and compliance, the author explores whether the electoral cycle affects enforcement. Two-stage least squares estimates suggest enforcement increases compliance.

Keywords: Labor regulations, compliance, enforcement, informal labor, Latin America 

JEL Classification: J8, J3, H26, K32, K41, O17