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Multiple equilibria in a firing game with impartial justice

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Author Info
Damien Besancenot () (CEPN - Centre d'économie de l'Université de Paris Nord - CNRS : UMR7115 - Université Paris-Nord - Paris XIII)
Radu Vranceanu () (Department of Economics - ESSEC)

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Abstract

In many European countries, a majority of employees are hired under very protective labor contracts thatrestrict the ability of the employer to dismiss them. In particular, employees can take to courts the firm’slayoff motive. Given the high costs specific to so-called economic motives and judges’ limited ability toprocess an ever growing flow of cases, in the last few years firms have been tempted to invoke faked personalmotives for firing "good" workers. This paper shows that the interaction between firms, employees andthe labor judicial system is consistent with multiple equilibria. Hence firing costs depend not only onvariables under the control of the government, but also on the nature of the equilibrium. Policies aimingat increasing flexibility, interpreted as a reduction in firing costs, should consider the possibility of shiftingfrom a high to a low firing costs equilibrium.

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Paper provided by HAL in its series Working Papers with number halshs-00203176_v1.

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Date of creation: 09 Jan 2008
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Handle: RePEc:hal:wpaper:halshs-00203176_v1

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Related research
Keywords: Labor judges; Firing costs; Layoff motive; Multiple equilibria.;

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Cahuc, Pierre & Postel-Vinay, Fabien, 2002. "Temporary jobs, employment protection and labor market performance," Labour Economics, Elsevier, vol. 9(1), pages 63-91, February. [Downloadable!] (restricted)
  2. Olivier Blanchard & Jean Tirole, 2004. "Redesigning the Employment Protection System," De Economist, Springer, vol. 152(1), pages 1-20, 03. [Downloadable!]
  3. Lars Ljungqvist, 2002. "How Do Lay--off Costs Affect Employment?," Economic Journal, Royal Economic Society, vol. 112(482), pages 829-853, October. [Downloadable!] (restricted)
  4. Bentolila, Samuel & Bertola, Giuseppe, 1990. "Firing Costs and Labour Demand: How Bad Is Eurosclerosis?," Review of Economic Studies, Blackwell Publishing, vol. 57(3), pages 381-402, July. [Downloadable!] (restricted)
  5. Pierre Cahuc & André Zylberberg, 2004. "Labor Economics," MIT Press Books, The MIT Press, edition 1, volume 1, number 026203316x.
  6. Olivier L'Haridon & Franck Malherbet, 2006. "Employment Protection Reform in Search Economies," IZA Discussion Papers 2304, Institute for the Study of Labor (IZA). [Downloadable!]
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  7. Ichino, Andrea & Polo, Michele & Rettore, Enrico, 2003. "Are judges biased by labor market conditions?," European Economic Review, Elsevier, vol. 47(5), pages 913-944, October. [Downloadable!] (restricted)
    Other versions:
  8. Edmund Phelps & Gylfi Zoega, 2001. "Structural booms," Economic Policy, CEPR, CES, MSH, vol. 16(32), pages 83-126, 04. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Benchimol, Jonathan & Fourçans, André, 2009. "Money in a DSGE framework with an application to the Euro Zone," ESSEC Working Papers DR 09005, ESSEC Research Center, ESSEC Business School. [Downloadable!]
  2. Damien Besancenot & Joao Faria & Kim Huynh, 2009. "Congestion in academic journals under an impartial selection process," Working Papers halshs-00382585_v1, HAL. [Downloadable!]
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This page was last updated on 2009-11-28.

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