Working Paper: NBER ID: w25137
Authors: Joyce Sadka; Enrique Seira; Christopher Woodruff
Abstract: 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.
Keywords: labor courts; settlement rates; field experiment; Mexico; informational asymmetries
JEL Codes: K31; K41; O43
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| personalized outcome predictions (C52) | settlement rates (E43) |
| personalized outcome predictions (C52) | settlement rates (when worker is present) (J63) |
| personalized outcome predictions (C52) | welfare for plaintiffs (I38) |
| personalized outcome predictions (C52) | likelihood of losing a judgment (K41) |
| personalized outcome predictions (C52) | likelihood of winning a judgment (K41) |
| personalized outcome predictions (C52) | case duration (when employee is present) (C41) |
| personalized outcome predictions (C52) | informational asymmetries between workers and lawyers (K31) |
| personalized outcome predictions (C52) | sustained increases in settlement rates (R23) |