THE IMPACT OF LABOR-MARKET REGULATIONS

This article investigates the impact of labor market regulations in a setting with incomplete compliance. If takes as its starting point the limited evidence regarding the distortionary costs of labor market re gulations and argues that there may exist natural limits to the effici ency losses engendered by such regulations. The article reviews some s tylized facts regarding labor market behavior, presents an analytical model that may explain such behavior, and provides a checklist for ass essing;the distortionary impact of regulations such as minimum wages.