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The Costs of Wrongful-Discharge Laws

  • David H. Autor
  • John J. Donohue
  • Stewart J. Schwab

We estimate the effects on employment and wages of wrongful-discharge protections adopted by U.S. state courts during the last three decades. We find robust evidence that one wrongful-discharge doctrine, the implied-contract exception, reduced state employment rates by 0.8% to 1.7%. The initial impact is largest for female and less-educated workers (those who change jobs frequently), while the longer-term effect is greater for older and more-educated workers (those most likely to litigate). By contrast, we find no robust employment or wage effects of two other widely recognized wrongful-discharge laws: the public-policy and goodfaith exceptions. Copyright by the President and Fellows of Harvard College and the Massachusetts Institute of Technology.

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Article provided by MIT Press in its journal The Review of Economics and Statistics.

Volume (Year): 88 (2006)
Issue (Month): 2 (May)
Pages: 211-231

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Handle: RePEc:tpr:restat:v:88:y:2006:i:2:p:211-231
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