Rafael de Carvalho Cayres Pinto.

09/04/2015

Orientador: Gustavo Gonzaga.

Co-orientador: Juliano Assunção.

Banca: Carlos Henrique Corseuil. Gabriel Ulyssea. Gustavo Gonzaga. Juliano Assunção. Leonardo Rezende. Naércio Aquino Menezes Filho.

Three essays on labor market institutions and labor turnover in Brazil

Nível: Doutorado

This thesis consists of three papers about the relationship between labor market institutions and labor turnover.
The first paper deals with the relationship between the enforcement of labor laws and turnover among formal workers with tenures shorter than one year. Examining administrative data from the Relação Annual de Informações Sociais (RAIS) of the Brazilian Ministry of Labor (MTE,0), the paper finds a previously undocumented discontinuous reduction in the frequency of layoffs at one year tenure. The analysis of institutions indicates that such behavior is generated by the requirement of an approval, called homologation, by the MTE or the worker’s union, of termination for contracts longer than one year. It is argued that such a procedure works as an effective firing cost from the standing point of firms that do not comply with labor regulations, which therefore have an incentive to anticipate lay-offs in order to avoid homologation. The empirical analysis suggests that firms subject to low inspection frequency by MTE respond to stricter enforcement by increasing turnover during the first year, thus avoiding the formation of labor liabilities that will eventually be paid in case of inspection or homologation.
The second paper examines the effects of two distortions potentially present in the institutions of the labor market in Brazil. The first is the incentive for collusion between workers and firms to the appropriation of benefits (unemployment insurance and FGTS) received by the former in case of unfair dismissal. The other is the incentive, identified in the first paper, for termination of employment contracts before reaching one year tenure, in order to avoid the homologation requirement. A model is developed and used to quantify the effect of these distortions, particularly in relation to firms’ turnover strategy. Estimates obtained using RAIS data indicate that both distortions have effects on the distribution of layoffs over the duration of employment contracts. However, simulations of the calibrated model show that distortions have little effect on the overall turnover, productivity and efficiency. The conclusion is that the distortions mentioned in the literature are relatively unimportant when compared to the selection of suitable employees for the job positions as a driver for turnover rates.
In the third and last paper, we assess the impact of these distortions on the turnover and productivity through their influence on incentives for investment in labor relationships. A new model is proposed, in which the productivity of the employment relationship depends on investment in human capital by the worker. The model represents an environment where distortions leading to high turnover decrease the incentive to invest in labor relationships. The lower investment, in turn, reduces relationships’ values, inducing more turnover. Thus, the existence of rents associated with turnover can result in reduced investment in human capital and low labor productivity.