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

Author

Listed:
  • Mrs. Swarnali A Hannan
  • Samuel Pienknagura

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.

Suggested Citation

  • Mrs. Swarnali A Hannan & Samuel Pienknagura, 2025. "The Impact of Labor Litigation Cases on Firm-level Productivity in Brazil," IMF Working Papers 2025/063, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2025/063
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