Enforceability of Labor Law: Evidence from a Labor Court in Mexico
We analyze lawsuits involving publicly-appointed lawyers in a labor court in Mexico to study the enforcement of a law that nominally provides high levels of worker protection. We show that, even after a judge rules in favor of the worker, the judgment goes uncollected 56% of the time due to the costs associated with the excessive formalism of the enforcement process. Diﬀerences in the probability of receiving compensation after trial, both across lawyers and across workers with dif- ferent levels of tenure, are not due to diﬀerences in win rates at trial, but rather are entirely attributable to post-trial diﬀerences in the probability of enforcing the judgment. This paper is the ﬁrst in the literature that demonstrates the importance of post-trial collection costs on litigation outcomes. We then develop a simple model of litigation that includes costs of collecting awards after trial and show how diﬀerences in lawsuit outcomes across lawyers can be rationalized theoretically.