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Are judges biased by labor market conditions?

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Author Info

  • Ichino, Andrea
  • Polo, Michele
  • Rettore, Enrico

Abstract

When a firing litigation is taken to court, only the characteristics of the employee's misconduct should be relevant for the judge's decision. Using data from an Italian bank this paper shows that, instead, local labor market conditions influence the court's decision: the same misconduct episode may be considered sufficient for firing in a tight labor market but insufficient otherwise. We reach this conclusion after taking carefully into consideration the non-random selection of firing litigations for trial. Although these results refer to the specific situation considered, they raise more general issues. For macroeconomists they suggest that higherunemployment rates may increase firing costs via the effect on courts'decision criteria; thus, the real extent of firing rigidities cannot beassessed without considering the role of courts. For labor law scholars, these findings are important because, following traditional principles, the law should be applied in the same way for all citizens and over the entire national territory.

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Bibliographic Info

Article provided by Elsevier in its journal European Economic Review.

Volume (Year): 47 (2003)
Issue (Month): 5 (October)
Pages: 913-944

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Handle: RePEc:eee:eecrev:v:47:y:2003:i:5:p:913-944

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Web page: http://www.elsevier.com/locate/eer

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  1. Louis S. Jacobson & Robert J. LaLonde & Daniel Sullivan, 1992. "Earnings Losses of Displaced Workers," Upjohn Working Papers and Journal Articles 92-11, W.E. Upjohn Institute for Employment Research.
  2. Andrea Ichino & Giovanni Maggi, 1999. "Work Environment and Individual Background: Explaining Regional Shirking Differentials in a Large Italian Firm," NBER Working Papers 7415, National Bureau of Economic Research, Inc.
  3. George L. Priest & Benjamin Klein, 1984. "The Selection of Disputes for Litigation," The Journal of Legal Studies, University of Chicago Press, vol. 13(1), pages 1-56, January.
  4. Louis S. Jacobson & Robert J. LaLonde & Daniel G. Sullivan, 1993. "Long-term earnings losses of high-seniority displaced workers," Economic Perspectives, Federal Reserve Bank of Chicago, issue Nov, pages 2-20.
  5. Lee, Lung-Fei, 1979. "On the first and second moments of the truncated multi-normal distribution and a simple estimator," Economics Letters, Elsevier, vol. 3(2), pages 165-169.
  6. Lucian Arye Bebchuk, 1984. "Litigation and Settlement under Imperfect Information," RAND Journal of Economics, The RAND Corporation, vol. 15(3), pages 404-415, Autumn.
  7. Waldfogel, Joel, 1998. "Reconciling Asymmetric Information and Divergent Expectations Theories of Litigation," Journal of Law and Economics, University of Chicago Press, vol. 41(2), pages 451-76, October.
  8. Joel Waldfogel, 1993. "The Selection Hypothesis and the Relationship between Trial and Plaintiff Victory," NBER Working Papers 4508, National Bureau of Economic Research, Inc.
  9. Imbens, G.W. & Lancaster, T., 1991. "Combining Micro and Macro Data in Microeconometric Models," Harvard Institute of Economic Research Working Papers 1578, Harvard - Institute of Economic Research.
  10. Bertola, Giuseppe, 1990. "Job security, employment and wages," European Economic Review, Elsevier, vol. 34(4), pages 851-879, June.
  11. Daron Acemoglu & Joshua Angrist, 1998. "Consequences of Employment Protection? The Case of the Americans with Disabilities Act," NBER Working Papers 6670, National Bureau of Economic Research, Inc.
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