Bujanda and de la Parra (2020)

Question 1

How Mexican firms respond to increasing cost of informal employment?

Answer 1

1 out of every 4 workers at formal firms is informally employed. overall, account for over half of all informal jobs in Mexico.

Question 2

what was there research question

Answer 2

Analyse how random inspections affects firms’ and workers’ outcomes across
margins, including wages, hiring, separations, and worker formalization.

Question 3

Results

Answer 3

On the quarter of inspection, the average probability that an informal worker
becomes formal at the same work-site increases from 14% to 21%.
- There is a reduction in firm growth by 2 percentage points.
- Employees that transition from informal to formal jobs due to an inspection
are more likely to be poached (get a job at another formal firm).
- Wages at the inspected employer are 1.4% higher for organically formalized
workers (without inspection); this wage gap disappears after being poached.
- Results consistent with employers using formality status as a signal of worker
productivity.