Editors’ note: This column is based on CEPR Discussion Paper 21541 “The labor market effects of regulating platform work: Evidence from Chile”.

The frequent classification of platform workers as independent contractors has driven a radical transformation in labour market relationships, enabling platforms to sidestep traditional employment regulations (Boeri et al. 2020).

This common practice has sparked intense debates about the precarious conditions of many platform workers, prompting regulatory responses across continents. These concerns are further amplified in Latin America, where independent contracting intersects with high rates of informality (Ulyssea 2018, ILO 2025), further reducing social protection. At the same time, with 46 million workers, the gig economy has become a major source of employment flexibility in the region, leading to marginal workers being drawn in. Hence, for Latin American governments, regulating the platform sector means trading off employment opportunities, informality, and social protection all at the same time.

Chile, which was the first country to take legislative action by putting in force the Platform Work Law  (Ley N° 21,431, hereafter PWL)  in September 2022, responded to this challenge thorough introducing the new legal figure of “independent platform worker” in the Chilean Labour Code. That is, platforms have to monitor, even when hiring through subcontracting firms, that their workers are registered with the tax authorities through freelance service invoices (Boletas de Honorarios). In addition, the law establishes maximum working hours, minimum pay, and the right to collective bargaining among independent platform workers. In a recent paper (Bamieh et al. 2026), we quantify the labour market effects of this reform on transportation workers, such as Uber drivers, who account for 84% of platform workers affected by the PWL. To that end, similar to previous work on Spain’s Riders’ Law (Dolado et al. 2025), we combine reduced-form methods with an equilibrium model of the platform work market which helps identify the main channels through which these effects take place.

In particular, we make use of the Chilean Labour Force Survey (LFS), which is one of the first nationally representative surveys worldwide to include a specific module on platform work. It provides individual-level monthly information on employment status, hours worked, occupation, industry, social security coverage, and firm tax registration for each specific web platform or mobile application, and whether these are their main jobs. This dataset is combined with the Income Supplement Survey, which reports monthly earnings for a large subset of the platform workers observed in the LFS. 

The Platform Work Law

Before the PWL, the transport and delivery platform sector employed 40,000 workers, accounting for 27.1% of gig employment (i.e. including Airbnb, WhatsApp, etc.) and 0.5% of total employment in Chile. Just after the reform, employment in the sector fell but it began to recover in 2023, surpassing pre-reform levels by the end of 2024. Platform companies classified 95% of their workforce as independent contractors rather than employees and, among the former, 80% were informal, subject to minimal regulation regarding working hours and remuneration. Moreover, the requirement of registering independent contractors with the tax authorities was barely met in practice. 

Table 1 summarises the main new regulations established in the reform by type of worker. Regarding dependent employment, the PWL introduces two main regulatory changes. The first one relates to the definition of working time, which is expanded to include both active service and passive waiting periods. Statutory maximum hours regulations (45 hour per week) are established, while only active hours are remunerated. The second change concerns minimum pay, which is set at 20% above the monthly national minimum wage, being proportional to the number of active hours worked. This premium aims at compensating workers for passive working time. As regards independent contractors, there have been regulatory changes concerning maximum working time, (84 hours per week), minimum pay (same as for employees), and the right to unionise.

Table 1 Main new regulations introduced by Platform Work Law

Note: This Table reports the main features of changes in the regulation of work arrangements following the Platform Work Law 21.431 by contract type. The source is Chapter X of Chile’s Labor Code.

The time series behaviour around the reform shown in Figure 1 suggests a clear turning point in employment composition following the PWL. Relative to the pre-reform period, the share of informal workers declines steadily by 16.1 percentage points, a drop that mirrors the surge in the share of formal contractors by 16.8 percentage points. By contrast, the share of formal employees hardly changes and nor do relative wages vary. To check whether these descriptive results hold once we net out other trends in the Chilean economy and control for the socio-demographic characteristics of platform workers, we run static difference-in-differences and dynamic event-study regressions for a treatment group and a control group, which are likely to face the same economy-wide trends. The former group is taken to be low-skilled workers in the transportation sector who work for a platform, while the latter are the same type of workers but not operating for platforms. The sample amounts to about 30,000 individuals over the period 2020q1 to 2024q4.  

Figure 1 Changes in the employment status of platform workers

The results of these exercises are qualitatively similar to those discussed above. The PWL is associated with an average drop of 8.2 percentage points in the share of informal workers while the share of formal independent contractors rises by a similar amount. No significant effects are found for either the share of employees, hourly income, hours worked, trade union participation, or the share of platform workers earning below the minimum wage.  Nonetheless, there is evidence of an increase in social security coverage of about 10.0 percentage points after the PWL in the treatment group relative to the control group, which is consistent with the replacement of informal contractors with formal ones. In addition, all these results remain invariant to several robustness tests.

Model interpretation of the results

The previous findings are fully consistent with a structural model where firms imperfectly comply with labour market regulations. As the PWL operates on the incentives of firms (by imposing sizeable fines in case they do not fulfil their monitoring obligations) instead of on workers’ incentives, we model the contract decision as one corresponding only to the firm. As in the data, employees differ from formal and informal contractors in their wages, the payroll taxes employers face, and their flexibility of working hours.  

Platforms have a production function where employees and (all) independent contractors are imperfect substitutes while, within the latter group, formal and informal workers are perfect substitutes.  The market is competitive and frictionless. Assuming equal wages, the number of informal contractors depends positively on the administrative cost (e.g. paperwork or legal costs) when hiring formal self-employed workers, and negatively on the cost of administrative sanctions per informal worker. The number of employees and the aggregate number of independent contractors depend on relative wages and relative payroll taxes, but not on the sanctions. Finally, workers are heterogenous in their preferences for leisure – that is, some like to work long hours while others opt for short hours – and are subject to a preference shock for working as employee or self-employed. Finally, wages clear both labour markets.

The model is calibrated to the Chilean platform work sector during the pre-reform period and does a good job of reproducing its main features. A key parameter is the per-informal worker sanction, which is set to match 80% of all workers being informal. Then, we use it to simulate the effects of the PWL by comparing the post-reform labour-market outcomes with a counterfactual setup where was not enacted (i.e. no higher fines on hiring informal workers, and no constraints on hours or remuneration floors). Our main findings are consistent with the above-mentioned reduced-form evidence, namely: (i) a shift of formerly informal self-employed to formal self-employed, with no change in the share of employees; and (ii) no difference in relative hourly wages between employees and independent contractors. 

The insight for these results is that the labour supply and labour demand decisions by the two different types of workers do not depend on potential sanctions. Only the firm’s decision to hire formal or informal self-employed is affected by fines, thus explaining the above-mentioned substitution effect, without changes in either the relative employment shares of employees and self-employed or in their wages as administrative sanctions increase. However, since higher sanctions affect average labour costs, firms’ profits fall, reducing entry in this sector. We also find that enforcing a maximum of 84 hours of work per week has only minor negative effects on welfare since only a small proportion of workers exceed this limit. In addition, we simulate the effects of eliminating employers’ payroll taxes for hiring employees to increase their share, but the results are negligible as these tax rates are already low in Chile. Finally, our simulation results show that the minimum pay requirement has been mostly ignored.

Conclusions

The previous results highlight the limitations that informality imposes on legislation around platform work in Latin America. To the extent that a relevant proportion of informal workers in the platform sector may be undocumented migrants who badly need income to survive, it could be argued that the PWL could be complemented with an amnesty providing work permits to those proving a sufficiently long residence time in Chile. It could improve welfare without triggering a big rise in wages.

References

Angrist, J, S Caldwell and J Hall (2021), “Uber versus taxi: A driver’s eye view”, American Economic Journal: Applied Economics 13(3): 272–308.

Bamieh, O, J J Dolado, A Jáñez and F Wellschmied (2026), “The labor market effects of regulating platform work: Evidence from Chile”, CEPR Discussion Paper 21541.

Boeri, T, G Giupponi, A Krueger and S Machin (2020), “Solo self-employment and alternative work arrangements: A cross-country perspective on the changing composition of jobs”, Journal of Economic Perspectives 34(1): 170–195.

Chen, M K, P Rossi, J Chevalier and E Oehlsen (2019), “The value of flexible work: Evidence from Uber drivers”, Journal of Political Economy 127(6): 2735–2794.

Dolado, J J, A Jáñez and F Wellschmied (2025), “Riders on the storm: The effects of regulating platform work”, VoxEU.org, 23 March.

Dolado, J J, E Lalé and H Turon (2026), “Zero-hours contracts in a frictional labor market”, The Economic Journal, forthcoming.

ILO (2025), Survey on Workers on Web-Based Digital Platforms: New Data for Latin America and the Caribbean Region.

Stanton, C and C Thomas (2025), “Who benefits from online gig economy platforms?”, American Economic Review115(6): 1857–1895.

 Ulyssea, G (2018), “Firms, informality, and development: Theory and evidence from Brazil”, American Economic Review 108(8): 2015–2047.