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Can Wrongful Discharge Law Enhance Employment?

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  • W. Bentley MacLeod
  • Voraprapa Nakavachara

Abstract

The extent of government in private contractual relationships is a vexing public policy issue. This article explores, both theoretically and empirically, the degree to which such intervention may enhance employment. Economists traditionally have held that interventions such as wrongful discharge protections simply undo the original intent of the parties to an employment contract. We find that both good faith as well as implied contract exceptions to employment-at-will may enhance employment, particularly in occupations characterised by high levels of investment and skill. This suggests that under the appropriate conditions, labour law may enhance the operation of a competitive market. Copyright 2007 The Author(s). Journal compilation Royal Economic Society 2007.

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Bibliographic Info

Article provided by Royal Economic Society in its journal The Economic Journal.

Volume (Year): 117 (2007)
Issue (Month): 521 (06)
Pages: 218-278

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Handle: RePEc:ecj:econjl:v:117:y:2007:i:521:p:218-278

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Cited by:
  1. Deffains, Bruno & Gabuthy, Yannick & Lambert, Eve-Angéline, 2010. "Labour disputes, investment decisions and the judiciary," Labour Economics, Elsevier, vol. 17(2), pages 424-433, April.
  2. Stankov, Petar, 2010. "Deregulation, economic growth and growth acceleration," MPRA Paper 26485, University Library of Munich, Germany.
  3. Olsson, Martin, 2007. "Employment Protection and Sickness Absence," Working Paper Series 717, Research Institute of Industrial Economics.
  4. Lawrence M. Kahn, 2012. "Labor market policy: A comparative view on the costs and benefits of labor market flexibility," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 31(1), pages 94-110, December.
  5. Kahn, Lawrence M., 2012. "Temporary jobs and job search effort in Europe," Labour Economics, Elsevier, vol. 19(1), pages 113-128.
  6. Baumann, Florian & Friehe, Tim, 2012. "On the evasion of employment protection legislation," Labour Economics, Elsevier, vol. 19(1), pages 9-17.

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