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The Selection of Employment Discrimination Disputes for Litigation: Using Business Cycle Effects to Test the Priest-Klein Hypothesis

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  • Siegelman, Peter
  • Donohue, John J, III

Abstract

Employment discrimination cases filed during recessions are more likely to settle after filing and less likely to be won by plaintiffs than those filed when the economy is strong. This model of litigation confirms two predictions of the Priest-Klein model of litigation. First, relatively weak cases (for either party) should be more likely to settle. Second, the party with the greater stake in litigation will have the higher win rate in adjudicated disputes; the special case of even stakes produces a 50 percent plaintiff win rate. The settlement process does not produce complete selection, however: the strong version of the Priest-Klein model predicts a constant win rate over the cycle, but the win rate falls during recessions. The observed settlement and win rate effects cannot be explained by changes in the parties' relative stakes over the business cycle, nor by variations over the cycle in the types of cases brought. Copyright 1995 by the University of Chicago.

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Bibliographic Info

Article provided by University of Chicago Press in its journal Journal of Legal Studies.

Volume (Year): 24 (1995)
Issue (Month): 2 (June)
Pages: 427-62

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Handle: RePEc:ucp:jlstud:v:24:y:1995:i:2:p:427-62

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Web page: http://www.journals.uchicago.edu/JLS/

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Cited by:
  1. Davis S. Kaplan & Joyce Sadka & Jorge Luis Silva-Mendez, 2006. "Litigation and Settlement: New Evidence from Labor Courts in Mexico," Working Papers 0606, Centro de Investigacion Economica, ITAM.
  2. 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.
  3. Saltari, Enrico & Tilli, Riccardo, 2011. "Firing costs and labor market tightness: Is there any relationship?," Research in Economics, Elsevier, vol. 65(1), pages 1-4, March.
  4. Riccardo Tilli & Enrico Saltari, 2008. "Do labor market conditions affect the strictness of employment protection legislation?," Economics Bulletin, AccessEcon, vol. 10(4), pages 1-9.
  5. Saltari, Enrico & Tilli, Riccardo, 2009. "The role and significance of endogenous firing costs in a matching model with endogenous job destruction," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 38(5), pages 799-808, October.
  6. Hylton, Keith N., 2002. "An asymmetric-information model of litigation," International Review of Law and Economics, Elsevier, vol. 22(2), pages 153-175, August.
  7. Keith N. Hylton & Haizhen Lin, 2009. "Trial Selection Theory: A Unified Model," Working Papers 2009-06, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.
  8. Carson Bays, 2007. "The Determinants of Tying Litigation, 1961–2001," International Advances in Economic Research, Springer, vol. 13(1), pages 81-96, February.
  9. Poitras, Marc & Frasca, Ralph, 2011. "A unified model of settlement and trial expenditures: The Priest–Klein model extended," International Review of Law and Economics, Elsevier, vol. 31(3), pages 188-195, September.
  10. Joanna Lahey, 2006. "How Do Age Discrimination Laws Affect Older Workers?," Work Opportunity Briefs wob_5, Center for Retirement Research, revised Oct 2006.
  11. Enrico Saltari & Riccardo Tilli, 2005. "Endogenous Firing Costs and Labor Market Equilibrium," Working Papers 89, University of Rome La Sapienza, Department of Public Economics.
  12. Daniel P. Kessler & Daniel L. Rubinfeld, 2004. "Empirical Study of the Civil Justice System," NBER Working Papers 10825, National Bureau of Economic Research, Inc.
  13. Lance Bachmeier & Patrick Gaughman Null & Norman R. Swanson, 2003. "The Volume of Federal Litigation and the Macroeconomy," Departmental Working Papers 200318, Rutgers University, Department of Economics.
  14. Fraisse, H. & Kramarz, F. & Prost, C., 2009. "Labor Court Inputs, Judicial Cases Outcomes and Labor Flows: Identifying Real EPL," Working papers 256, Banque de France.
  15. repec:ebl:ecbull:v:10:y:2008:i:4:p:1-9 is not listed on IDEAS

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