DP13261 Information and Bargaining through Agents: Experimental Evidence from Mexico's Labor Courts

Author(s): Joyce Sadka, Enrique Seira, Christopher Woodruff
Publication Date: October 2018
Date Revised: October 2020
Keyword(s): Labor courts, overconfidence, Settlement, statistical information
JEL(s): J52, J83, K31, K41, K42
Programme Areas: Development Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=13261

Well-functioning courts are essential for the health of both financial and real economies. Courts function poorly in most lower-income countries, but the root causes of poor performance are not well understood. We use a field experiment with ongoing cases to analyze sources of dysfunction in Mexico's largest labor court. Providing the parties with personalized outcome predictions doubles settlement rates and reduces average case duration, but only when the worker is present to receive the information. An intervention before plaintiffs contact a lawyer increases pre-suit settlement. The experiment illuminates agency issues among plaintiffs with private lawyers. For most workers, the treatment appears to improve welfare, as measured by discounted payouts and ability to pay bills.