Enforceability of Labor Law: Evidence from a Labor Court in Mexico

36 Pages Posted: 20 Apr 2016

See all articles by Joyce Sadka

Joyce Sadka

Instituto Tecnológico Autónomo de México (ITAM)

David S. Kaplan

World Bank - Foreign Investment Advisory Service (FIAS)

Date Written: January 1, 2008

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.

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

Suggested Citation

Sadka, Joyce and Kaplan, David S., Enforceability of Labor Law: Evidence from a Labor Court in Mexico (January 1, 2008). World Bank Policy Research Working Paper No. 4483, Available at SSRN: https://ssrn.com/abstract=1086862

Joyce Sadka (Contact Author)

Instituto Tecnológico Autónomo de México (ITAM) ( email )

Av. Camino a Santa Teresa #930
Col. Heroes de Padierna
Mexico City, D.F. 10370
Mexico

David S. Kaplan

World Bank - Foreign Investment Advisory Service (FIAS) ( email )

1818 H Street, NW
Washington, DC 20433
United States

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