Working Papers

Violation and Enforcement of Workplace Regulations: Evidence from Mexican Firm Inspections
with Agustina Colonna and Jorge Pérez Pérez

• SSRN WP: 5557740
  Abstract

  This paper studies the characteristics of large formal firms that violate workplace regulations and analyzes how regulatory enforcement affects firms and workers. A stylized model of monopsonistic firms - in which employers set both wages and working conditions - shows that high levels of labor market power can lead to violations in workplace regulations, and that the enforcement of such regulations can raise firm employment through an expansion of labor supply. To test the model's predictions, we use administrative records of stratified random firm inspections in Mexico, which enforce compliance with workplace safety, health regulations, and mandatory worker training. We link these records to panel surveys and administrative employer-employee data for large manufacturing firms. We find that firms are more likely to be found violating regulations if they invest less in worker training, have lower productivity, employ a smaller share of women, and employ a larger share of the local labor market. Furthermore, inspections tend to increase regulatory compliance, reflected in greater investment in worker training, fewer workplace accidents, and a lower likelihood of future violations. Using a staggered difference-indifferences design, we estimate that inspections increase firm employment by 4 to 7% within one year. Average firm wages decrease by less than 2%, driven by changes in worker composition rather than changes in individual wage setting. Our results indicate that enforcing workplace regulations in large manufacturing firms can be an effective policy tool for improving working conditions, mitigating labor market power, and simultaneously increasing firm employment.
• Presentations: UZH Doctoral Development Seminar 2023, UZH Doctoral Labor Seminar 2024*, UZH Doctoral Labor Seminar 2025, Uppsala Firms and Public Policy Workshop 2025, IIPF Nairobi 2025 (honorable mention for IIPF Young Economist Award)

Challenging Conventional Wisdom: Theoretical (Ir)relevance of Statutory Incidence of Ad Valorem Taxes
with Konstantin Poensgen

• SSRN WP: 5232926
  Abstract

  Conventional wisdom in the theoretical public finance literature suggests that the economic incidence of a tax is independent of its statutory (nominal) incidence in a frictionless, competitive economy. This paper cautions that this result is more nuanced for ad valorem taxes even in this benchmark case. Ad valorem taxes are proportional to the price (e.g., a 7% sales tax), whereas per unit or specific taxes are a fixed $ amount per unit of the good (e.g., 10 cents per liter of gasoline). First, we prove that statutory irrelevance fails in the canonical sense: shifting the statutory incidence of a constant ad valorem tax rate towards the demand side decreases the consumer price, increases the supplier price, and thus increases the equilibrium quantity. This relevance result is due to differences in the tax base when shifting the statutory incidence. The revenue-maximizing statutory incidence of a fixed ad valorem tax depends on the supply and demand elasticities. Second, we introduce a new, weaker notion of statutory irrelevance: a shift in the statutory incidence can be accompanied by a change in the tax rate that keeps equilibrium prices and allocation unchanged while holding tax revenue constant. Ad valorem taxes satisfy weak irrelevance. We derive testable formulas for economic incidence accounting for these results and provide numerical examples of the economic relevance of statutory incidence. We apply our results to payroll taxes in OECD countries. Together, our insights offer policymakers the ability to more effectively address economic incidence of tax policies.
• Graphs, Files
• Presentations: Harvard Graduate Labor/PF Workshop*, Harvard Graduate Contracts Workshop*, UZH Doctoral Labor Seminar 2025

* Presented by co-author