The Right and the Politics of Labor Informality Enforcement

Abstract

The enforcement of labor informality is subject to electoral motivations, and political parties on the left and right have different incentives to do so. While leftist governments are more lenient not to harm their informal electorate, right-wing incumbents face an electoral dilemma: the part of its constituency that benefits from informal work is in favor of a permissive attitude, but another section demands a tough hand to deal with the unfair competition that informal work represents. Taking Chile as a case study and drawing on panel data on labor inspections, this article explores the electoral drivers behind enforcement. Our estimations, robust to fixed-effect and panel event-study approach, reveal that the left does not forbear, but the right carries out selective enforcement, concentrating inspections in competitive districts and accelerating the pace of control as presidential polls approach. The article concludes with policy recommendations to limit the electoral bias.