The Economic Costs of Court Decisions Concerning Dismissals in Japan: Identification by Judge Transfers
The goal of this paper is to detect the degree to which court decisions control the stringency of employment protection and to investigate how such judicial discretion affects labor market performance. However, identification difficulty arises because court decisions are volatile against economic and social conditions. This paper overcomes the endogeneity problem by exploiting the triennial judge transfer system in Japan, or the exogenous allocation of judges to prefectures. A key finding is that the prefecture employment rate is reduced by approximately 1.4% if a prefecture receives more pro-worker judgments than pro-employer ones in a given year.
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