مقررات ورود، نهادهای بازار کار و بخش غیررسمی

This paper develops a two-sector matching model that incorporates the main features of Latin American labor markets. It has an innovation in its matching structure that makes it more consistent with some key stylized facts of the informal sector in these countries. The model is numerically solved using Brazilian data and several policy simulations are performed. Reducing formal sector's entry cost significantly reduces the size of the informal sector and improves overall labor market performance. Increasing enforcement significantly reduces informality but has strong adverse effects on unemployment and welfare. Thus, the results indicate that the tradeoff between lower informal employment and higher unemployment rates is not present when one looks at policies that aim at reducing the costs of being formal, as opposed to policies that simply increase the costs of being informal.

A common feature of almost every Latin American country is the existence of extremely restrictive labor market institutions and strict regulation of entry. As a consequence, for both firms and workers the decision of being formal turns out to be extremely costly, which significantly increases the attractiveness of informal activities. From the firms' perspective, the costs of being formal can be separated in two: (i) the costs of entering the formal sector, which come from procedures, fees and bureaucracy requirements to start a formal business; and (ii) the costs of staying in the formal sector, which can be further divided into taxes, regulation and bureaucratic requirements. Being informal also entails costs that are directly or indirectly related to labor market institutions: (i) the official penalties applied when the firm is caught by the government; and (ii) restricted access to public goods, specially the law system and police. Turning to the workers side, the main costs of being formal come from the taxes associated to formal labor contracts, notably income taxes and mandated social security contributions. Being informal, however, implies that the worker does not have access to the benefits predicted by law, is not protected by job security legislation and faces higher turnover rates.

The quantitative exercises consist in solving the equation system presented at the end of the previous section (Eq. (21)) for each set of new parameters that characterize the policy experiments. The simulation exercises are restricted to parameters related to institutions, while the remaining are treated as structural parameters of the economy and, therefore, remain unchanged. Some of the parameters are directly observed in the data, others can be estimated or extracted from previous empirical works, and a small share of them must be calibrated within the model. Table 3 presents the set of initial parameters that characterize the status quo of the Brazilian labor market.