Enforcement and Compliance with Labor Regulations in Argentina

The author 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 panel data for the period 1995–2002 across provinces and using the number of labor inspectors per capita as a proxy for enforcement, he estimates the effect of enforcement on compliance 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 instrumenting enforcement by electoral years. Two-stage least squares estimates suggest enforcement increases compliance.