The Impact of Labor Litigation Cases on Firm-level Productivity in Brazil

Swarnali Hannan and Samuel Pienknagura

No 2025/063, IMF Working Papers from International Monetary Fund

Abstract: The Brazilian labor market went through significant changes in 2017 with reforms to reduce litigation and increase flexibility in employment contracts. Using firm-level data, we exploit the variation in litigation cases across Brazilian states to estimate the impact of the 2017 labor reforms on productivity. The results suggest a significant boost in total factor productivity (TFP) for labor- and trade-intensive firms from the decline in litigation costs. High labor intensive firms witnessed an increase in TFP of about 15 percent after the reform compared to low labor-intensive firms. Similar magnitudes are found for trade-internsive firms. There is also some suggestive evidence that the productivity-enhancing effects of the reforms are especially pronounced for small firms.

Keywords: Labor market reforms; litigation cases; total factor productivity (search for similar items in EconPapers)
Pages: 21
Date: 2025-04-04
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