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Labour Disputes, Investment Decisions and the Judiciary

Author

Listed:
  • Bruno Deffains

    (ERMES - Equipe de recherche sur les marches, l'emploi et la simulation - UP2 - Université Panthéon-Assas - CNRS - Centre National de la Recherche Scientifique, EconomiX - EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique)

  • Yannick Gabuthy

    (BETA - Bureau d'Économie Théorique et Appliquée - INRA - Institut National de la Recherche Agronomique - UNISTRA - Université de Strasbourg - UL - Université de Lorraine - CNRS - Centre National de la Recherche Scientifique)

  • Eve-Angéline Lambert

    (CRESE - Centre de REcherches sur les Stratégies Economiques (UR 3190) - UFC - Université de Franche-Comté - UBFC - Université Bourgogne Franche-Comté [COMUE], BETA - Bureau d'Économie Théorique et Appliquée - INRA - Institut National de la Recherche Agronomique - UNISTRA - Université de Strasbourg - UL - Université de Lorraine - CNRS - Centre National de la Recherche Scientifique)

Abstract

In this article, we show that the presence of the judiciary in the background of labour relationships is not neutral within these relations: its potential intervention in case of an ex-post layoff and conflict over the severance payment can promote ex-ante efficient specific investment decisions. This ability to promote efficiency depends on the judiciary's aptitude to balance out the parties' ex-post bargaining powers. Interestingly one of the results shows that, if workers' bargaining power in wage negotiations is low, which implies that they expect low returns from continuing the relationships, an increase in the exogenous layoff probability should lead judges to be less lenient towards them.

Suggested Citation

  • Bruno Deffains & Yannick Gabuthy & Eve-Angéline Lambert, 2010. "Labour Disputes, Investment Decisions and the Judiciary," Post-Print hal-00485100, HAL.
    • Handle: RePEc:hal:journl:hal-00485100
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    Cited by:

    1. Yannick Gabuthy & Eve-Angéline Lambert & Lionel Thomas, 2013. "Severance Payment: Incentive or Lethargy Effect?," Scottish Journal of Political Economy, Scottish Economic Society, vol. 60(1), pages 43-55, February.
    2. Boeri, Tito & Garibaldi, Pietro & Moen, Espen R., 2017. "Inside severance pay," Journal of Public Economics, Elsevier, vol. 145(C), pages 211-225.

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