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The Burden of Labour Costs in Mexico

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  • Gabriel Montes Rojas
  • Mauricio Santamaría

Abstract

We analysed labour costs in Mexico and evaluated their impact in terms of firm performance. Using a new survey, we studied how firms chose to conduct a firing procedure (i.e. mandatory payment, negotiation, or legal dispute) and the actual costs derived from that decision. We found that firms that negotiate have, on average, lower costs. This may mean that workers subvaluate the legal benefits. Moreover, legal disputes may increase firing costs by 50 per cent. We contributed to the analysis of the impact of such costs on employment and found that, when firms negotiate or pay higher costs, this decreases the level of employment. We also analysed the impact of Social Benefits on employment using an industrial survey. We found that a 10 per cent increment in these benefits may have a negative long-term impact of 9 per cent on the level of employment. Copyright 2007 The Authors; Journal compilation 2007 CEIS, Fondazione Giacomo Brodolini and Blackwell Publishing Ltd..

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Bibliographic Info

Article provided by CEIS in its journal LABOUR.

Volume (Year): 21 (2007)
Issue (Month): 1 (03)
Pages: 157-188

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Handle: RePEc:bla:labour:v:21:y:2007:i:1:p:157-188

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Cited by:
  1. Montes-Rojas, Gabriel & Santamaria, Mauricio, 2007. "Sources of productivity growth: Evidence from the Mexican manufacturing sector," The North American Journal of Economics and Finance, Elsevier, vol. 18(3), pages 263-278, December.
  2. David S. Kaplan & Joyce Sadka, 2011. "The Plaintiff's Role in Enforcing a Court Ruling: Evidence from a Labor Court in Mexico," IDB Publications 38198, Inter-American Development Bank.
  3. World Bank, 2009. "Mexico - Improving Productivity for the Urban Poor," World Bank Other Operational Studies 3047, The World Bank.

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