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Institutions' and Firms' Adjustments: Measuring the Impact of Courts' Delays on Job Flows and Productivity

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  • Giuseppina Gianfreda
  • Giovanna Vallanti

Abstract

Not only is labor-market rigidity the result of legislative provisions, but it is determined by the institutional framework at large. We argue that courts' delays in settling labor disputes affect the strictness of employment-protection legislation by increasing the expected firing costs. We exploit the variation in the length of labor trials across Italian judicial districts and the fact that the Italian legislation regarding firing prescribes different firing regimes for firms above the 15-employee threshold and provide evidence on the impact of courts' delays on job reallocation and firms' productivity. We show that in judicial districts with longer trials, the rate of job turnover is significantly lower. This occurs through lower rates of job destruction and, to a lesser extent, job creation. We also find a detrimental impact of courts' delays on the labor productivity of firms above the 15-employee threshold. The effect is stronger in sectors with higher flexibility requirements.

Suggested Citation

  • Giuseppina Gianfreda & Giovanna Vallanti, 2017. "Institutions' and Firms' Adjustments: Measuring the Impact of Courts' Delays on Job Flows and Productivity," Journal of Law and Economics, University of Chicago Press, vol. 60(1), pages 135-172.
    • Handle: RePEc:ucp:jlawec:doi:10.1086/692833
    DOI: 10.1086/692833
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    Cited by:

    1. Andrea Garnero & Claudio Lucifora, 2020. "Turning A Blind Eye? Compliance To Minimum Wages And Employment," DISCE - Working Papers del Dipartimento di Economia e Finanza def085, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE).
    2. G. Sulis & M. Conti & M. Bratti, 2018. "Employment Protection, Temporary Contracts and Firm-provided Training: Evidence from Italy," Working Paper CRENoS 201802, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
    3. Bratti, Massimiliano & Conti, Maurizio & Sulis, Giovanni, 2019. "Employment Protection and Firm-Provided Training: Quasi-Experimental Evidence from a Labour Market Reform," IZA Discussion Papers 12773, Institute of Labor Economics (IZA).
    4. De Paola, Maria & Nistico, Roberto & Scoppa, Vincenzo, 2020. "Fertility Decisions and Employment Protection: The Unintended Consequences of the Italian Jobs Act," IZA Discussion Papers 12991, Institute of Labor Economics (IZA).
    5. Cahuc, Pierre & Carcillo, Stéphane & Patault, Bérengère & Moreau, Flavien, 2020. "Judge Bias in Labor Courts and Firm Performance," IZA Discussion Papers 13794, Institute of Labor Economics (IZA).
    6. Anatoliy Kostruba, 2017. "State in the system of subjects of civil law of ukraine [Держава В Системі Суб’Єктів Цивільного Права України]," Post-Print hal-02488855, HAL.
    7. 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).
    8. Ibrahim Mike Okumu & Patricia Naluwooza & Edward Bbaale, 2022. "Firm Dynamics, Job Creation and Job Destruction in Africa: Is the Quality of Institutional Environment Relevant?," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 34(6), pages 2970-3004, December.
    9. Giuseppina Gianfreda & Giovanna Vallanti, 2020. "Labor Courts and Firing Costs: The Labor‐Market Effects of Trial Delays," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 59(1), pages 40-84, January.
    10. Baoqing Tang & Bo Gao & Jing Ma, 2021. "The impact of export VAT rebates on firm productivity: Evidence from China," The World Economy, Wiley Blackwell, vol. 44(10), pages 2798-2820, October.
    11. Biancardi, Daniele & Lucifora, Claudio & Origo, Federica, 2022. "Short-time work and unionization," Labour Economics, Elsevier, vol. 78(C).
    12. Gianluca Cerruti & Gianluca Mazzarella & Mauro Migliavacca, 2023. "Employment protection legislation and household formation: evidence from Italy," Review of Economics of the Household, Springer, vol. 21(3), pages 913-939, September.
    13. Emanuela Carbonara & Giuseppina Gianfreda & Enrico Santarelli & Giovanna Vallanti, 2021. "The impact of intellectual property rights on labor productivity: do constitutions matter? [Research and development in the growth process]," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 30(4), pages 884-904.
    14. Andrea Garnero & Claudio Lucifora, 2022. "Turning a ‘Blind Eye’? Compliance with Minimum Wage Standards and Employment," Economica, London School of Economics and Political Science, vol. 89(356), pages 884-907, October.
    15. Giuseppina Gianfreda & Giovanna Vallanti, 2015. "Labour Courts delays and the composition of employment: Is labour encouraged or endangered by institutions?," Working Papers LuissLab 15121, Dipartimento di Economia e Finanza, LUISS Guido Carli.
    16. Pierre Cahuc & Stéphane Carcillo & Bérangère Patault & Flavien Moreau, 2022. "Judge Bias in Labor Courts and Firm Performance," Working Papers hal-03881619, HAL.

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