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Are Judges Sensitive to Economic Conditions? Evidence from UK Employment Tribunals

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  • Ioana Marinescu

Abstract

In the UK, dismissed workers can sue their ex-employers for unfair dismissal. This paper investigates whether judges deciding on such cases are sensitive to economic conditions faced by firms and workers. In bad times, getting fired is more costly for workers, while at the same time firms find firing costs harder to bear. How do judges decide? I use British data on individual unfair dismissal and redundancy payment cases brought to Employment Tribunals in 1990-1992. Controlling for case selection, I find that, when the dismissed worker has found a new job, higher unemployement and bankruptcy rates both have a negative impact on the worker’s probability of pervailing at trial. However, when dismissed workers are still unemployed, a higher unemployment rate has a positive impact on their probability of winning. On the whole population of cases brought to trial, a one point increase in the unemployment rate leads to a 7 points decrease in the probability of judges deciding in favour of dismissed employees. An increase in the bankruptcy rate has a similar effect. These findings are consistent with the idea that judges maximize the joint welfare of the dismissed worker and the firm, tailoring firing costs to local and individual economic circumstances.

Suggested Citation

  • Ioana Marinescu, 2008. "Are Judges Sensitive to Economic Conditions? Evidence from UK Employment Tribunals," Working Papers 0802, Harris School of Public Policy Studies, University of Chicago.
  • Handle: RePEc:har:wpaper:0802
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    Cited by:

    1. Régis Blazy & Bertrand Chopard & Agnès Fimayer & Jean-Daniel Guigou, 2007. "Financial versus Social Efficiency of Corporate Bankruptcy Law: the French Dilemma?," LSF Research Working Paper Series 07-02, Luxembourg School of Finance, University of Luxembourg.
    2. repec:got:cegedp:87 is not listed on IDEAS
    3. Riccardo Tilli & Enrico Saltari, 2008. "Do labor market conditions affect the strictness of employment protection legislation?," Economics Bulletin, AccessEcon, vol. 10(4), pages 1-9.
    4. Pierre Bentata & Yolande Hiriart, 2015. "Biased Judges: Evidence from French Environmental Cases," Working Papers hal-01377922, HAL.
    5. Goerke, Laszlo & Pannenberg, Markus, 2010. "An economic analysis of dismissal legislation: Determinants of severance pay in West Germany," International Review of Law and Economics, Elsevier, vol. 30(1), pages 71-85, March.
    6. Claudine Desrieux & Romain Espinosa, 2018. "Case Selection and Judicial Decision-Making: Evidence from French Labor Courts," Post-Print halshs-01827472, HAL.
    7. Per Skedinger, 2010. "Employment Protection Legislation," Books, Edward Elgar Publishing, number 13686.
    8. Eichhorst, Werner, 2013. "Reformüberlegungen und Marktasymmetrie: Die Potenziale einer Abfindungslösung," IZA Standpunkte 62, Institute for the Study of Labor (IZA).
    9. repec:kap:ejlwec:v:45:y:2018:i:3:d:10.1007_s10657-018-9576-9 is not listed on IDEAS
    10. Bruno Jeandidier & Cécile Bourreau-Dubois & Jean-Claude Ray & Myriam Doriat-Duban, 2016. "Does Gender Matter in the Civil Law Judiciary? Evidence from French Child Support Court Decisions," Working Papers of BETA 2016-55, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
    11. Martín-Román, Ángel & Moral, Alfonso & Martínez-Matute, Marta, 2015. "Peer effects in judicial decisions: Evidence from Spanish labour courts," International Review of Law and Economics, Elsevier, vol. 42(C), pages 20-37.
    12. Freyens, Benoit Pierre & Gong, Xiaodong, 2017. "Judicial decision making under changing legal standards: The case of dismissal arbitration," Journal of Economic Behavior & Organization, Elsevier, vol. 133(C), pages 108-126.
    13. Juan F. Jimeno & Marta Martínez-Matute & Juan S. Mora-Sanguinetti, 2015. "Employment protection legislation and labor court activity in Spain," Working Papers 1507, Banco de España;Working Papers Homepage.
    14. Chopard, Bertrand & Langlais, Eric, 2009. "Défaut de paiement stratégique et loi sur les défaillances d'entreprises
      [Strategic default and bankruptcy law]
      ," MPRA Paper 14366, University Library of Munich, Germany.
    15. Pietro Garibaldi & Gerard A. Pfann, 2015. "Dismissal Disputes and Endogenous Sorting," CESifo Working Paper Series 5425, CESifo Group Munich.
    16. Miguel Á. Malo & Ángel Martín-Román & Alfonso Moral, 2018. "“Peer effects” or “quasi-peer effects” in Spanish labour court rulings," European Journal of Law and Economics, Springer, vol. 45(3), pages 497-525, June.
    17. Paul Latreille, 2017. "The economics of employment tribunals," IZA World of Labor, Institute for the Study of Labor (IZA), pages 331-331, January.
    18. Hiroko Okudaira, 2009. "The Economic Costs of Court Decisions Concerning Dismissals in Japan: Identification by Judge Transfers," ISER Discussion Paper 0733r, Institute of Social and Economic Research, Osaka University, revised Sep 2015.
    19. repec:eee:irlaec:v:53:y:2018:i:c:p:60-75 is not listed on IDEAS

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    Keywords

    judges; economics; British; unemployment;

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