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Labor Court Inputs, Judicial Cases Outcomes and Labor Flows: Identifying Real EPL

Author

Listed:
  • Fraisse, H.
  • Kramarz, F.
  • Prost, C.

Abstract

Using a data set of individual labor disputes brought to court over the years 1990 to 2003 in France, we examine the impact of the enforcement of Employment Protection Legislation on labor market outcomes. First, we present a simple theoretical model showing that judicial case outcomes cannot be directly interpreted in terms of EPL. A large fraction of cases that go to trials may well be a sign of low firing costs when firms face low litigation costs and are therefore willing to go to court or a sign of high firing costs when workers face low litigation costs and are therefore willing to sue the firm. Second, we exploit our model as well as the French institutional setting to generate instruments for these endogenous outcomes. Using these instruments, we show that labor courts decisions have a causal effect on labor flows. More dropped cases and more trials cause more job destructions: more trials indeed are a sign of lower separation costs. More settlements, higher filing rates, a larger fraction of workers represented at trial, large lawyer density dampen job destruction. A larger judge density causes less job creation, in particular on the extensive margin.

Suggested Citation

  • Fraisse, H. & Kramarz, F. & Prost, C., 2009. "Labor Court Inputs, Judicial Cases Outcomes and Labor Flows: Identifying Real EPL," Working papers 256, Banque de France.
  • Handle: RePEc:bfr:banfra:256
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    References listed on IDEAS

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    Cited by:

    1. Emmanuelle Lavallée & Vincent Vicard, 2013. "National borders matterwhere one draws the lines too," Canadian Journal of Economics, Canadian Economics Association, vol. 46(1), pages 135-153, February.
    2. Giuseppina Gianfreda & Giovanna Vallanti, 2017. "Informality and productivity: do firms escape EPL through shadow employment? Evidence from a regression discontinuity design," Working Papers 2017-01, Universita' di Cassino, Dipartimento di Economia e Giurisprudenza.
    3. Boeri, Tito & Garibaldi, Pietro & Moen, Espen R, 2014. "Severance Pay," CEPR Discussion Papers 10182, C.E.P.R. Discussion Papers.
    4. 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.
    5. Boeri, Tito & Garibaldi, Pietro & Moen, Espen R., 2017. "Inside severance pay," Journal of Public Economics, Elsevier, vol. 145(C), pages 211-225.
    6. Giuseppina Gianfreda & Giovanna Vallanti, 2013. "Courts' ineffciency and irregular workers:identifying the impact of real EPL," Working Papers LuissLab 13104, Dipartimento di Economia e Finanza, LUISS Guido Carli.
    7. Boeri, Tito & Garibaldi, Pietro & Moen, Espen R., 2013. "The Economics of Severance Pay," IZA Discussion Papers 7455, Institute for the Study of Labor (IZA).
    8. Robin Christmann, 2014. "No Judge, No Job! Court errors and the contingent labor contract," European Journal of Law and Economics, Springer, vol. 38(3), pages 409-429, December.

    More about this item

    Keywords

    Employment protection legislation; Labor flows; Labor judges; Unfair dismissal; France;

    JEL classification:

    • J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions
    • J53 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Labor-Management Relations; Industrial Jurisprudence
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • K31 - Law and Economics - - Other Substantive Areas of Law - - - Labor Law

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