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Labor courts, nomination bias and unemployment in Germany

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  • Berger, Helge
  • Neugart, Michael

Abstract

Labor courts play an important role in determining the effective level of labor market regulation in Germany, but their application of law may not be even-handed. Based on a simple theoretical model and a new panel data set, we identify a nomination bias in labor court activity - that is, court activity varies systematically with the political leaning of the government that has appointed judges. In an extension, we find a significant positive relation between labor court activity and unemployment, even after controlling for the endogeneity of court activity. The results have potentially important policy implications regarding the independence of the judiciary and labor market reforms.
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  • Berger, Helge & Neugart, Michael, 2011. "Labor courts, nomination bias and unemployment in Germany," Publications of Darmstadt Technical University, Institute for Business Studies (BWL) 56070, Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute for Business Studies (BWL).
    • Handle: RePEc:dar:wpaper:56070
    Note: for complete metadata visit http://tubiblio.ulb.tu-darmstadt.de/56070/
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    Cited by:

    1. Jimeno Juan F. & Mora-Sanguinetti Juan S. & Martínez-Matute Marta, 2020. "Employment protection legislation, labor courts, and effective firing costs," IZA Journal of Labor Economics, Sciendo & Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 9(1), pages 1-26, January.
    2. Hefeker, Carsten & Neugart, Michael, 2010. "Labor market regulation and the legal system," International Review of Law and Economics, Elsevier, vol. 30(3), pages 218-225, September.
    3. Potrafke, Niklas, 2013. "Minority positions in the German Council of Economic Experts: A political economic analysis," European Journal of Political Economy, Elsevier, vol. 31(C), pages 180-187.
    4. Freyens, Benoit Pierre & Gong, Xiaodong, 2017. "Judicial decision making under changing legal standards: The case of dismissal arbitration," Journal of Economic Behavior & Organization, Elsevier, vol. 133(C), pages 108-126.
    5. Lars Hornuf & Lars Klöhn, 2019. "Do judges hate speculators?," European Journal of Law and Economics, Springer, vol. 47(2), pages 147-169, April.
    6. Goerke, Laszlo & Neugart, Michael, 2015. "Lobbying and dismissal dispute resolution systems," International Review of Law and Economics, Elsevier, vol. 41(C), pages 50-62.
    7. Miguel Á. Malo & Ángel Martín-Román & Alfonso Moral, 2018. "“Peer effects” or “quasi-peer effects” in Spanish labour court rulings," European Journal of Law and Economics, Springer, vol. 45(3), pages 497-525, June.
    8. Pierre Bentata & Romain Espinosa & Yolande Hiriart, 2019. "Correction Activities by France’s Supreme Courts and Control over their Dockets," Revue d'économie politique, Dalloz, vol. 129(2), pages 169-204.
    9. Heijdra, Ben J. & Ligthart, Jenny E., 2007. "Fiscal policy, monopolistic competition, and finite lives," Journal of Economic Dynamics and Control, Elsevier, vol. 31(1), pages 325-359, January.
    10. Pierre Cahuc & Stéphane Carcillo & Bérangère Patault & Flavien Moreau, 2022. "Judge Bias in Labor Courts and Firm Performance," Working Papers hal-03881619, HAL.
    11. Voigt, Stefan, 2012. "On the optimal number of courts," International Review of Law and Economics, Elsevier, vol. 32(1), pages 49-62.
    12. Claudia Buch & Martin Schlotter, 2013. "Regional origins of employment volatility: evidence from German states," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 40(1), pages 1-19, February.
    13. Cahuc, Pierre & Carcillo, Stéphane & Patault, Bérengère & Moreau, Flavien, 2020. "Judge Bias in Labor Courts and Firm Performance," IZA Discussion Papers 13794, Institute of Labor Economics (IZA).
    14. Uwe Jirjahn & Jens Mohrenweiser, 2016. "Owner-Managers and the Failure of Newly Adopted Works Councils," British Journal of Industrial Relations, London School of Economics, vol. 54(4), pages 815-845, December.
    15. Lars Hornuf & Lars Klöhn, 2018. "Do Judges Hate Speculators?," CESifo Working Paper Series 7375, CESifo.
    16. Benoit Pierre Freyens & Paul Oslington, 2021. "The impact of unfair dismissal regulation: Evidence from an Australian natural experiment," LABOUR, CEIS, vol. 35(2), pages 264-290, June.
    17. Ewelina Mruk & Inmaculada Aguiar-Díaz & Maria Victoria Ruiz-Mallorquí, 2019. "Use of formal insolvency procedure and judicial efficiency in Spain," European Journal of Law and Economics, Springer, vol. 47(3), pages 435-470, June.
    18. Pierre Cahuc & Stéphane Carcillo & Bérangère Patault & Flavien Moreau, 2022. "Judge Bias in Labor Courts and Firm Performance," SciencePo Working papers Main hal-03881619, HAL.
    19. Camille Signoretto & Julie Valentin, 2019. "Individual dismissals for personal and economic reasons in French firms: One or two models?," European Journal of Law and Economics, Springer, vol. 48(2), pages 241-265, October.
    20. Booth, James Francis & Freyens, Benoit Pierre, 2014. "A study of political activism in labour courts," Economics Letters, Elsevier, vol. 123(3), pages 370-373.
    21. Freyens, Benoit Pierre & Gong, Xiaodong, 2020. "Judicial arbitration of unfair dismissal cases: The role of peer effects," International Review of Law and Economics, Elsevier, vol. 64(C).
    22. Juan F. Jimeno & Marta Martínez-Matute & Juan S. Mora-Sanguinetti, 2015. "Employment protection legislation and labor court activity in Spain," Working Papers 1507, Banco de España.
    23. Niklas Potrafke, 2013. "Minority Voting on the Council of Experts: A Politico-Economic Analysis," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 66(09), pages 37-40, May.
    24. Robin Christmann, 2014. "No Judge, No Job! Court errors and the contingent labor contract," European Journal of Law and Economics, Springer, vol. 38(3), pages 409-429, December.

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    More about this item

    JEL classification:

    • J53 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Labor-Management Relations; Industrial Jurisprudence
    • K31 - Law and Economics - - Other Substantive Areas of Law - - - Labor Law
    • K41 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Litigation Process
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity

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