Institutions x Workers (Estevão & Filho)

Institutions, informality, and wage flexibility: Evidence from Brazil by Marcello Estevão and Irineu de Carvalho Filho published by IMF. “Even though institutions are created to protect workers, they may interfere with labor market functioning raise unemployment, and end up being circumvented by informal contracts. This paper uses Brazilian microeconomic data to show that the institutional changes introduced by the 1988. Constitution lowered the sensitivity of real wages to changes in labor market slack and could have contributed to the ensuing higher rates of unemployment in the country.”