IMF Working Papers

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

By Swarnali A Hannan, Samuel Pienknagura

April 4, 2025

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Format: Chicago

Swarnali A Hannan, and Samuel Pienknagura. "The Impact of Labor Litigation Cases on Firm-level Productivity in Brazil", IMF Working Papers 2025, 063 (2025), accessed April 26, 2025, https://doi.org/10.5089/9798229006842.001

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Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

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.

Subject: Employment, Labor, Labor force, Labor market reforms, Production, Productivity, Total factor productivity

Keywords: Caribbean, Employment, Global, Labor force, Labor market reforms, Litigation case, Litigation cases, Litigation cost, Productivity, Productivity in Brazil, Productivity-enhancing effect, Regressions incl ude firm, Total factor productivity

Publication Details

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