Does the Strength of Labour Regulation Affect Self-Employment? Evidence from the BRICS Countries

Abstract

This article examines the relationship between labour regulation and self-employment in the BRICS countries by using data from the Labour Regulation Index developed at the Centre for Business Research at Cambridge University (CBR-LRI) and the ILOSTAT collected and developed by the ILO Department of Statistics from 1992 to 2013. The research is conducted in two strands. In the first strand, the study examines the relationship between labour regulation and self-employment at the overall level. The empirical results obtained suggest that a negative relationship exists in Brazil, China, and South Africa, while a positive relationship exists in Russia and South Africa. This implies that, as the relative strength of labour regulation increases in Brazil, China, and South Africa, fewer workers are likely to be engaged in self-employment. In Russia and India, however, the result implies that more workers are likely to be engaged in self-employment with relatively stronger labour regulation. In the second strand, the study provides a breakdown of labour regulation and self-employment into measures of their constituent components, including the regulation on different forms of employment, working time, dismissal of employees, employee representation, and industrial actions and employers’ and vulnerable employment. The findings suggest that not all five aspects of labour regulation have a significant effect on employers’ and vulnerable employment in the BRICS countries except for Russia. The most influential or the only aspect that has a significant effect on employers’ employment is the regulation on different forms of employment in Brazil and South Africa (negative) and Russia (positive), and the regulation on industrial actions in India (positive) and China (negative), while the most influential or the only aspect affecting vulnerable employment is the regulation on dismissal in Brazil (negatively), the regulation on employee representation in Russia (positively), the regulation on different forms of employment in India (positively), the regulation on industrial actions in China (negatively), and the regulation on working time in South Africa (positively).