Teaching Labor Laws: Evidence From a Randomized Control Trial in South Africa

We assess whether imperfect knowledge of labor regulation hinders job creation at small and medium-sized firms. We partner with a labor law expert in South Africa that provides information to local firms about major topics regarding labor regulation via newsletters and access to a specialized website. We randomly assign 1800 firms to receive free access to this information service for a 21-week period. Three-quarters of the firms offered the service took it up. Six months later, the average employment level at treatment firms was 12 to 15% higher than at control firms, with absolute employment gains concentrated among workers under permanent and fixed-term contracts. The intervention increased optimal employment level and decreased the perception that labor regulation is a constraint to hiring among treatment firms.