Berkeley Program in Law and Economics

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.