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Are judges biased by labor market conditions?

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  • Ichino, Andrea
  • Polo, Michele
  • Rettore, Enrico

Abstract

When a firing litigation is taken to court, only the characteristics of the employee's misconduct should be relevant for the judge's decision. Using data from an Italian bank this paper shows that, instead, local labor market conditions influence the court's decision: the same misconduct episode may be considered sufficient for firing in a tight labor market but insufficient otherwise. We reach this conclusion after taking carefully into consideration the non-random selection of firing litigations for trial. Although these results refer to the specific situation considered, they raise more general issues. For macroeconomists they suggest that higherunemployment rates may increase firing costs via the effect on courts'decision criteria; thus, the real extent of firing rigidities cannot beassessed without considering the role of courts. For labor law scholars, these findings are important because, following traditional principles, the law should be applied in the same way for all citizens and over the entire national territory.
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Suggested Citation

  • 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.
  • Handle: RePEc:eee:eecrev:v:47:y:2003:i:5:p:913-944
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    References listed on IDEAS

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    1. Bertola, Giuseppe, 1990. "Job security, employment and wages," European Economic Review, Elsevier, vol. 34(4), pages 851-879, June.
    2. Andrea Ichino & Giovanni Maggi, 2000. "Work Environment and Individual Background: Explaining Regional Shirking Differentials in a Large Italian Firm," The Quarterly Journal of Economics, Oxford University Press, vol. 115(3), pages 1057-1090.
    3. Waldfogel, Joel, 1998. "Reconciling Asymmetric Information and Divergent Expectations Theories of Litigation," Journal of Law and Economics, University of Chicago Press, vol. 41(2), pages 451-476, October.
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    8. Waldfogel, Joel, 1995. "The Selection Hypothesis and the Relationship between Trial and Plaintiff Victory," Journal of Political Economy, University of Chicago Press, vol. 103(2), pages 229-260, April.
    9. Louis S. Jacobson & Robert J. LaLonde & Daniel G. Sullivan, 1993. "Long-term earnings losses of high-seniority displaced workers," Economic Perspectives, Federal Reserve Bank of Chicago, issue Nov, pages 2-20.
    10. Lee, Lung-Fei, 1979. "On the first and second moments of the truncated multi-normal distribution and a simple estimator," Economics Letters, Elsevier, vol. 3(2), pages 165-169.
    11. George L. Priest & Benjamin Klein, 1984. "The Selection of Disputes for Litigation," The Journal of Legal Studies, University of Chicago Press, vol. 13(1), pages 1-56, January.
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