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Litigation Costs and Returns to Experience

Author

Listed:
  • Paul Oyer
  • Scott Schaefer

Abstract

We develop a model linking maximum damage awards available to plaintiffs in wrongful termination lawsuits, workers' propensity to sue as a function of experience, and returns to experience. Using Equal Employment Opportunity Commission data on protected-worker discrimination complaints and labor-market data from the Current Population Survey, we examine how returns to experience among protected workers changed around the passage of the Civil Rights Act of 1991. We show that employers' reactions to employment protections may induce redistributive effects. Furthermore, these effects operate not merely across groups of differing protected status, but also within groups of identical protected status. (JEL D21, J31, J71, K31)

Suggested Citation

  • Paul Oyer & Scott Schaefer, 2002. "Litigation Costs and Returns to Experience," American Economic Review, American Economic Association, vol. 92(3), pages 683-705, June.
    • Handle: RePEc:aea:aecrev:v:92:y:2002:i:3:p:683-705
    Note: DOI: 10.1257/00028280260136318
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    References listed on IDEAS

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    1. Thomas DeLeire, 2000. "The Wage and Employment Effects of the Americans with Disabilities Act," Journal of Human Resources, University of Wisconsin Press, vol. 35(4), pages 693-715.
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    6. Paul Oyer & Scott Schaefer, 2000. "Layoffs and Litigation," RAND Journal of Economics, The RAND Corporation, vol. 31(2), pages 345-358, Summer.
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    Citations

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    Cited by:

    1. MacLeod, W. Bentley, 2011. "Great Expectations: Law, Employment Contracts, and Labor Market Performance," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 4, chapter 18, pages 1591-1696, Elsevier.
    2. B. Kriechel & G. A. Pfann, 2013. "Workforce reorganization and the worker," Applied Economics, Taylor & Francis Journals, vol. 45(13), pages 1719-1729, May.
    3. David H. Autor, 2000. "Outsourcing at Will: Unjust Dismissal Doctrine and the Growth of Temporary Help Employment," JCPR Working Papers 153, Northwestern University/University of Chicago Joint Center for Poverty Research.
    4. Oyer, Paul & Schaefer, Scott, 2002. "Sorting, Quotas, and the Civil Rights Act of 1991: Who Hires When It's Hard to Fire?," Journal of Law and Economics, University of Chicago Press, vol. 45(1), pages 41-68, April.
    5. Bottasso, Anna & Bratti, Massimiliano & Cardullo, Gabriele & Conti, Maurizio & Sulis, Giovanni, 2023. "Labor Market Regulation and Firm Adjustments in Skill Demand," IZA Discussion Papers 16262, Institute of Labor Economics (IZA).
    6. Oyer, Paul & Schaefer, Scott, 2011. "Personnel Economics: Hiring and Incentives," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 4, chapter 20, pages 1769-1823, Elsevier.
    7. Edward P. Lazear & Paul Oyer, 2012. "Personnel Economics [The Handbook of Organizational Economics]," Introductory Chapters,, Princeton University Press.
    8. Edward P. Lazear, 1995. "Personnel Economics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262121883, December.
    9. David H. Autor & John J. Donohue & Stewart J. Schwab, 2006. "The Costs of Wrongful-Discharge Laws," The Review of Economics and Statistics, MIT Press, vol. 88(2), pages 211-231, May.
    10. John J. Donohue III, 2005. "The Law and Economics of Antidiscrimination Law," NBER Working Papers 11631, National Bureau of Economic Research, Inc.
    11. Yagan, Danny, 2016. "Supply vs. demand under an affirmative action ban: Estimates from UC law schools," Journal of Public Economics, Elsevier, vol. 137(C), pages 38-50.
    12. Andrea Vindigni & Simone Scotti & Cristina Tealdi, 2015. "Uncertainty and the Politics of Employment Protection," Journal of Labor Economics, University of Chicago Press, vol. 33(1), pages 209-267.
    13. Joanna N. Lahey & Douglas R. Oxley, 2021. "Discrimination at the Intersection of Age, Race, and Gender: Evidence from an Eye‐Tracking Experiment," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 40(4), pages 1083-1119, September.
    14. Oliver Fabel & Razvan Pascalau, 2013. "Recruitment of Seemingly Overeducated Personnel: Insider--Outsider Effects on Fair Employee Selection Practices," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 20(1), pages 57-82, February.
    15. Ioana Marinescu, 2009. "Job Security Legislation and Job Duration: Evidence from the United Kingdom," Journal of Labor Economics, University of Chicago Press, vol. 27(3), pages 465-486, July.
    16. Kim, Soojin & Rhee, Serena, 2018. "Measuring the effects of employment protection policies: Theory and evidence from the Americans with Disabilities Act," Labour Economics, Elsevier, vol. 54(C), pages 116-134.
    17. Fainshmidt, Stav & White, George O. & Cangioni, Carole, 2014. "Legal Distance, Cognitive Distance, and Conflict Resolution in International Business Intellectual Property Disputes," Journal of International Management, Elsevier, vol. 20(2), pages 188-200.
    18. Karl David Boulware & Kenneth N. Kuttner, 2018. "Labor market conditions and charges of discrimination: Is there a link?," Wesleyan Economics Working Papers 2018-007, Wesleyan University, Department of Economics.
    19. Christine Jolls & J.J. Prescott, 2004. "Disaggregating Employment Protection: The Case of Disability Discrimination," NBER Working Papers 10740, National Bureau of Economic Research, Inc.

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    More about this item

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J71 - Labor and Demographic Economics - - Labor Discrimination - - - Hiring and Firing
    • K31 - Law and Economics - - Other Substantive Areas of Law - - - Labor Law

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    1. Litigation Costs and Returns to Experience (AER 2002) in ReplicationWiki

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