Litigation and Settlement: New Evidence from Labor Courts in Mexico

David S. Kaplan, World Bank and ITAM
Joyce Sadka, ITAM
Jorge Luis Silva-Mendez, Stanford University

Abstract

Using a newly assembled data set on procedures filed in Mexican labor tribunals, we study the determinants of final awards to workers. On average, workers recover less than 30% of their claim. Our strongest result is that workers receive higher percentages of their claims in settlements than in trial judgments. We also find that cases with multiple claimants against a single firm are less likely to be settled, which partially explains why workers involved in these procedures receive lower percentages of their claims. Finally, we find evidence that a worker who exaggerates her claim is less likely to settle.