The Enforcement of Labor Law in the Developing World : Some Stylized Facts from Labor Inspections

This paper empirically explores the incidence of labor inspections across firms in 72 developing countries. Given the relatively little knowledge on the behavior of labor inspection agencies, our objective is to present a collection of stylized facts on the incidence of enforcement. Our findings consistently show that larger firms are more likely to be inspected than smaller firms. Interestingly, inspections are less likely to occur among firms with a larger share of low-skilled workers, and that operate in industries with more tax evasion. Furthermore, we do not find evidence that the firm’s market power is correlated with inspections. We explore the heterogeneity of these findings across income and geographic groups, and conclude by briefly discussing the consistency of the stylized facts with competing theories of inspection agencies behavior. Overall, the evidence suggests that inspection agencies in the developing world usually have low levels of efficiency and effectiveness.