E Economic Analysis of Brazilian Labor Law Sergio Pinheiro Firpo and Luciana Yeung Insper Institute of Education and Research, São Paulo, Brazil Definition Being a civil law country, Brazil heavily relies on codified rules to regulate labor relations. For this purpose, back in the 1940s, a comprehensive set of laws was consolidated in the Consolidação das Leis Trabalhista (CLT), which remains the main source of labor regulation in the country, even after some minor reforms in the end of the year 2017 (to be discussed ahead). Besides the CLT, the Federal Constitution itself has several clauses governing labor and employment relations. Finally, more and more judicial precedents have been taken and followed (although not in a man- datory manner) as sources of law. Introduction Labor law in Brazil is based on a paternalistic, overly protective, and dictatorial view of employees. The first and perhaps most important principle is that of the vulnerability of employees: these are considered almost legally incapacitated, with no knowledge whatsoever of what their desires are. This is the first and sharp contrast with the economic concept of rational agents: people do know what their preferences are and what costs they must incur in order to maximize their benefits. Another assumption by the Brazilian labor law is that of adversarial relations between employers and employees. On one hand, employees are con- sidered to be irrational, not knowing what their preferences are, and totally lacking bargaining power; on the other hand, employers are consid- ered to be pure profit maximizers, willing to adopt inhumane conditions for his/her employees with the sole objective to reduce production costs. Because of that, legislators, judges, and law enforcers will stay vigilant to regulate this rela- tionship. Under such circumstances, the scenario predicted by Coase, of cooperative bargaining, leading to efficient allocation of resources, becomes even more a piece of fiction. Labor rela- tions, by definition and assumption, are consid- ered to be of very high transaction costs. Then, as Coase’ s theorem clearly predicts, the law will directly impact on the efficient allocation of resources. The question is as follows: Has this impact been mostly positive or mostly negative in Brazil? The answer is not difficult to find. We provide in the second half of this entry a brief review of the empirical literature showing the negative impacts on efficiency of these regulations. # Springer Science+Business Media, LLC, part of Springer Nature 2018 A. Marciano, G. B. Ramello (eds.), Encyclopedia of Law and Economics, https://doi.org/10.1007/978-1-4614-7883-6_694-1