The Impact of the Agrarian Promotion Law on the Income of Formal Workers.

This research assesses the impact of the Agrarian Promotion Law (APL) on formal workers’ income in sectors affected by the aforementioned law. To explore this impact, we use detailed information from the National Household Survey (ENAHO) and estimate the effect by applying a difference-in-difference (DD) estimator. We find in our baseline results that the APL had a positive impact of 52% on the average income of formal workers in the long run (2001-2015). Finally, we estimate a DD model with propensity score matching (PSM) and then a DD model with instrumental variables (DDIV) to avoid potential endogeneity problems. We find that the effect of the APL is larger in terms of magnitude (115% in the long run), which could be explained by a possible tendency of some workers to misreport their labor formality status (social desirability bias) on household surveys.