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 field experiments with ongoing cases to analyse sources of dysfunction in Mexico’s largest labour court. We provide parties with personalized predictions for case outcomes and show that this information nearly doubles settlement rates and reduces average case duration. The experiment generates the first experimental evidence in live court cases that reducing information asymmetries results in a decrease in delay, an outcome predicted by many theories of bargaining. We also find that the information treatment is effective only when the plaintiff is present to receive it directly, suggesting agency issues between plaintiffs and their private lawyers. For most workers, the treatment appears to improve welfare, as measured by discounted payouts and ability to pay bills.

We show that firm size is increasing with the quality of the legal system in Mexico. A 1-standard-deviation improvement in the quality of the legal system is associated with a 0.15–0.30 standard deviation increase in firm size. We also show that the legal system affects firm size by reducing the idiosyncratic risk faced by firm owners. The legal system has a smaller impact on partnerships and corporations than on proprietorships, where risk is concentrated in a single owner. All of the findings are robust to instrumenting for legal quality using historical conditions. By focusing on firms in a single country, the data draw attention to the importance of informal institutions.

We marketed a training program for lower level managers (line supervisors) to large factories in the Bangladeshi ready-made garment industry. Take-up of the program (even for a free slot) was low, due to intense production pressures, fire-fighting and concerns over retention of trained workers. Take-up is quite insensitive to pricing. There was higher interest and demand in training modules aimed at improving production processes and quality, rather than human resources and social compliance. Since the program was priced close to a commercially viable rate, it might be possible to develop a market provided they could be proved to be effective.

Wage subsidies have long been used by Governments as part of their active labor market policies to generate employment for the disadvantaged or to sustain employment during downturns. The current global financial crisis has seen such policies return to prominence, with many developed nations using such policies to try and reduce lay-offs. Nicholas Kaldor (1936), P. Richard Layard and Stephen Nickell (1980), and Lawrence Katz (1998) lay out the economic arguments for such a policy, and discuss conditions under which a short-term subsidy might have longer-term effects on employment for the targeted individuals.

The world’s poor are seeing a rapid expansion in access to formal savings accounts. What is the source of savings when households are connected to a formal account? We combine a high-frequency panel survey spanning two and a half years with an experiment in which a Sri Lankan bank used mobile Point-of-Service (POS) terminals to collect deposits directly from households each week. We find that the headwaters of formal savings lie in sacrificed leisure time: households work more, and improved savings options generate an increase in labour effort in both self-employment and in the wage market. The results suggest that the labour allocation channel is an important mechanism linking savings opportunities to income.