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Are Judges Sensitive to Economic Conditions? Evidence from UK Employment Tribunals

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Ioana Marinescu

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Abstract

In the UK, dismissed workers can sue their ex-employers for unfair dismissal. This paper investigates whether judges deciding on such cases are sensitive to economic conditions faced by firms and workers. In bad times, getting fired is more costly for workers, while at the same time firms find firing costs harder to bear. How do judges decide? I use British data on individual unfair dismissal and redundancy payment cases brought to Employment Tribunals in 1990-1992. Controlling for case selection, I find that, when the dismissed worker has found a new job, higher unemployement and bankruptcy rates both have a negative impact on the worker’s probability of pervailing at trial. However, when dismissed workers are still unemployed, a higher unemployment rate has a positive impact on their probability of winning. On the whole population of cases brought to trial, a one point increase in the unemployment rate leads to a 7 points decrease in the probability of judges deciding in favour of dismissed employees. An increase in the bankruptcy rate has a similar effect. These findings are consistent with the idea that judges maximize the joint welfare of the dismissed worker and the firm, tailoring firing costs to local and individual economic circumstances.

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Paper provided by Harris School of Public Policy Studies, University of Chicago in its series Working Papers with number 0802.

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Date of creation: Jan 2008
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Handle: RePEc:har:wpaper:0802

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Related research
Keywords: judges; economics; British; unemployment;

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  1. Eric Langlais, 2008. "Le "risque judiciaire" et les licenciements en France: le point de vue de l’économie du risque," EconomiX Working Papers 2008-31, University of Paris West - Nanterre la Défense, EconomiX. [Downloadable!]
    Other versions:
  2. Langlais, Eric, 2005. "Indemnisation des préjudices et fréquence des procès en présence d'une asymétrie d'informaion sur l'aversion au risque des parties
    [Compensation of damages and frequency of trials with asymmet
    ," MPRA Paper 1150, University Library of Munich, Germany, revised 06 Nov 2006. [Downloadable!]
    Other versions:
  3. Tito Boeri & J. Ignacio Conde-Ruiz & Vincenzo Galasso, 2006. "The Political Economy of Flexicurity," Working Papers 2006-15, FEDEA. [Downloadable!]
  4. Chopard, Bertrand & Langlais, Eric, 2009. "Défaut de paiement stratégique et loi sur les défaillances d'entreprises
    [Strategic default and bankruptcy law]
    ," MPRA Paper 14366, University Library of Munich, Germany. [Downloadable!]
    Other versions:
  5. Chopard, Bertrand & Langlais, Eric, 2007. "Renégociation stratégique de la dette, risque comptable et risque juridique
    [Strategic Bankruptcy with accountable and judicial risks]
    ," MPRA Paper 4805, University Library of Munich, Germany. [Downloadable!]
  6. Eric Langlais, 2008. "Asymmetric information, self-serving bias and the pretrial negotiation impasse," EconomiX Working Papers 2008-30, University of Paris West - Nanterre la Défense, EconomiX. [Downloadable!]
  7. Langlais, Eric, 2008. "Cognitive dissonance, risk aversion and the pretrial negotiation impasse," MPRA Paper 8844, University Library of Munich, Germany. [Downloadable!]
  8. Riccardo Tilli & Enrico Saltari, 2008. "Do labor market conditions affect the strictness of employment protection legislation?," Economics Bulletin, Economics Bulletin, vol. 10(4), pages 1-9. [Downloadable!]
    Other versions:
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