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The Labor Market Effects of Regulating Platform Work: Evidence from Chile
Chile’s 2022 Platform Work Law mandates firms to monitor their subcontractors’ formality and establishes maximum working hours, minimum pay, and the right to collective bargaining among independent contractors. Chile further stands out worldwide for providing a comprehensive and nationally representative dataset for platform work that allows us to track workers’ labor market outcomes over 2020-2024. By means of DiD and event study regressions, we find that this reform induced an 8-percentage-point shift from the share of informal to formal subcontractors with no change in the share of employees. Moreover, there were no significant changes in collective bargaining, compliance with minimum pay and maximum hours, or wage differentials between employees and subcontractors. The changes in hiring practices and wages are consistent with a structural labor market model where firms hire employees and formal and informal subcontractors. The calibrated model also shows that the reform reduced platforms’ profits, while strictly enforcing hours regulations would lead to very small welfare losses.
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