Labor Court Inputs, Judicial Cases Outcomes and Labor Flows: Identifying Real EPL
AbstractUsing a data set of individual labor disputes brought to court over the years 1990 to 2003 in France, we examine the impact of the enforcement of Employment Protection Legislation on labor market outcomes. First, we present a simple theoretical model showing that judicial case outcomes cannot be directly interpreted in terms of EPL. A large fraction of cases that go to trials may well be a sign of low firing costs when firms face low litigation costs and are therefore willing to go to court or a sign of high firing costs when workers face low litigation costs and are therefore willing to sue the firm. Second, we exploit our model as well as the French institutional setting to generate instruments for these endogenous outcomes. Using these instruments, we show that labor courts decisions have a causal effect on labor flows. More dropped cases and more trials cause more job destructions: more trials indeed are a sign of lower separation costs. More settlements, higher filing rates, a larger fraction of workers represented at trial, large lawyer density dampen job destruction. A larger judge density causes less job creation, in particular on the extensive margin.
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Bibliographic InfoPaper provided by Banque de France in its series Working papers with number 256.
Length: 50 pages
Date of creation: 2009
Date of revision:
Employment protection legislation; Labor flows; Labor judges; Unfair dismissal; France;
Find related papers by JEL classification:
- J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions
- J53 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Labor-Management Relations; Industrial Jurisprudence
- J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
- K31 - Law and Economics - - Other Substantive Areas of Law - - - Labor Law
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-12-19 (All new papers)
- NEP-LAB-2009-12-19 (Labour Economics)
- NEP-MIC-2009-12-19 (Microeconomics)
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