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Enforceability of labor law : evidence from a labor court in Mexico

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Author Info
Kaplan, David S.
Sadka, Joyce

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Abstract

The authors analyze lawsuits involving publicly-appointed lawyers in a labor court in Mexico to study how a rigid law is enforced. They show that, even after a judge has awarded something to a worker alleging unjust dismissal, the award goes uncollected 56 percent of the time. Workers who are dismissed after working more than seven years, however, do not leave these awards uncollected because their legally-mandated severance payments are larger. A simple theoretical model is used to generate predictions on how lawsuit outcomes should depend on the information available to the worker and on the worker's cost of collecting an award after trial, both of which are determined in part by the worker's lawyer. Differences in outcomes across lawyers are consistent with the hypothesis that firms take advantage both of workers who are poorly informed and of workers who find it more costly to collect an award after winning at trial.

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Paper provided by The World Bank in its series Policy Research Working Paper Series with number 4483.

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Date of creation: 01 Jan 2008
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Handle: RePEc:wbk:wbrwps:4483

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Related research
Keywords: Public Sector Corruption&Anticorruption Measures; Information Security&Privacy; Legal Products; Microfinance; Bankruptcy and Resolution of Financial Distress;

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  1. Ricardo J. Caballero & Kevin N. Cowan & Eduardo M.R.A. Engel & Alejandro Micco, 2004. "Effective Labor Regulation and Microeconomic Flexibility," Cowles Foundation Discussion Papers 1480, Cowles Foundation, Yale University, revised Oct 2006. [Downloadable!]
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  2. Rita Almeida & Pedro Carneiro, 2007. "Inequality and Employment in a Dual Economy: Enforcement of Labor Regulation in Brazil," IZA Discussion Papers 3094, Institute for the Study of Labor (IZA). [Downloadable!]
  3. Josh Lerner & Antoinette Schoar, 2005. "Does Legal Enforcement Affect Financial Transactions? The Contractual Channel in Private Equity," The Quarterly Journal of Economics, MIT Press, vol. 120(1), pages 223-246, January.
  4. Kaplan, David S. & Gonzalez, Gabriel Martinez & Robertson, Raymond, 2007. "Mexican employment dynamics : evidence from matched firm-worker data," Policy Research Working Paper Series 4433, The World Bank. [Downloadable!]
  5. Theodore Eisenberg & Henry S. Farber, 1996. "The Litigious Plaintiff Hypothesis: Case Selection and Resolution," NBER Working Papers 5649, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  6. Fenn, Paul & Rickman, Neil, 1999. "Delay and Settlement in Litigation," Economic Journal, Royal Economic Society, vol. 109(457), pages 476-91, July. [Downloadable!] (restricted)
  7. Lanjouw, Jean O & Schankerman, Mark, 2004. "Protecting Intellectual Property Rights: Are Small Firms Handicapped?," Journal of Law & Economics, University of Chicago Press, vol. 47(1), pages 45-74, April.
  8. Juan Botero & Simeon Djankov & Rafael Porta & Florencio C. Lopez-De-Silanes, 2004. "The Regulation of Labor," The Quarterly Journal of Economics, MIT Press, vol. 119(4), pages 1339-1382, November. [Downloadable!] (restricted)
    Other versions:
    • Simeon Djankov & Rafael La Porta & Florencio Lopez-de-Silane & Andrei Shleifer & Juan Botero, 2003. "The Regulation of Labor," NBER Working Papers 9756, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  9. Davis S. Kaplan & Joyce Sadka & Jorge Luis Silva-Mendez, 2006. "Litigation and Settlement: New Evidence from Labor Courts in Mexico," Working Papers 0606, Centro de Investigacion Economica, ITAM. [Downloadable!]
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