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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

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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Bibliographic Info

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
Date of revision:
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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References

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  1. Josh Lerner & Antoinette Schoar, 2005. "Does Legal Enforcement Affect Financial Transactions? The Contractual Channel in Private Equity," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 120(1), pages 223-246, January.
  2. Ricardo J. Caballero & Eduardo M.R.A. Engel & Alejandro Micco, 2004. "Effective Labor Regulation and Microeconomic Flexibility," Working Papers, Economic Growth Center, Yale University 893, Economic Growth Center, Yale University.
  3. Fenn, Paul & Rickman, Neil, 1999. "Delay and Settlement in Litigation," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 109(457), pages 476-91, July.
  4. Kaplan, David S. & Sadka, Joyce & Silva-Mendez, Jorge Luis, 2007. "Litigation and settlement : new evidence from labor courts in Mexico," Policy Research Working Paper Series 4434, The World Bank.
  5. 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.
  6. Lanjouw, Jean O & Schankerman, Mark, 2004. "Protecting Intellectual Property Rights: Are Small Firms Handicapped?," Journal of Law and Economics, University of Chicago Press, University of Chicago Press, vol. 47(1), pages 45-74, April.
  7. Gong, Jiong & McAfee, R Preston, 2000. "Pretrial Negotiation, Litigation, and Procedural Rules," Economic Inquiry, Western Economic Association International, Western Economic Association International, vol. 38(2), pages 218-38, April.
  8. Theodore Eisenberg & Henry S. Farber, 1996. "The Litigious Plaintiff Hypothesis: Case Selection and Resolution," NBER Working Papers 5649, National Bureau of Economic Research, Inc.
  9. Almeida, Rita K. & Carneiro, Pedro, 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).
  10. 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.
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Citations

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Cited by:
  1. Danielle Venn, 2009. "Legislation, Collective Bargaining and Enforcement: Updating the OECD Employment Protection Indicators," OECD Social, Employment and Migration Working Papers 89, OECD Publishing.
  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.

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