Enforcement spillovers under different networks: The case of quotas for persons with disabilities in Brazil

Abstract

This study examines labor law enforcement spillovers in Brazil, focusing on disability quota enforcement for formal firms. New inspection procedures increased compliance through heightened inspections and fines, boosting disability hiring. The largest increase is observed among individuals with mobility impairments, followed by those with visual and cognitive impairments. Most new hires came from outside the formal labor market, while some were poached from other firms. Additionally, job tenure for persons with disabilities in large firms improved. We investigate spillover effects across various firm networks: neighborhood, ownership, and human resources specialists. Results show that spillovers can have up to 3.4 times the impact on disability employment compared to direct fines. These findings highlight the potential for targeted enforcement strategies to amplify policy effectiveness beyond directly affected firms, even in developing economies characterized by low compliance with employment laws.