Three essays about enforcement, labor markets and education

Abstract

This thesis analyzes how government enforcement contribute to the labor market and educational behavior in developing countries. The first chapter studies how informality responds to the quality of the labor enforcement and the bundle of benefits that the formal workers receive. Countries in Latin America with different levels of informality were compared, highlighting the features that could induce these different levels. In a general equilibrium framework, the government chooses a level of enforcement and a bundle of benefits maximizing the workers utility subject to a budget constraint. A representative firm chooses the share of workers in formality and informality that they want to hire, and the workers offer a share of time in formality and informality. The chapter concludes that differences in the quality functions of government enforcement and benefits are found, as well as in the fines established to enforce the agents. The second chapter, co-authored with Gonzalo Salas, examines how the level of enforcement of the conditionalities of two Conditional Cash Transfer programs affects the ratios of high school students drop-out. We develop a structural discrete choice model in which the individuals who are above or below the participation threshold decide whether or not to attend school, participate in the labor market, or spend time on home production and/or leisure. The policy experiments show that if the level of enforcement is higher, individuals change study for leisure and work, but this last choice has a limit. Moreover, if the amount of transfer is reduced, the share of those who only study goes down and individuals work more. The third chapter examines how changes in the social security scheme affect the participation path of workers between formality and informality. Workers construct their decision paths in the labor market depending on the retirement program and their endowment of human capital. The strictness of the requirements lead to more formality but not enough to obtain a pension for all the educative levels. Finally, the extension of the compulsory active life leads to more formality and better pensions.