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From the Substance to the Shadow: The Court Embedded into Japanese Labor Markets

Modern contract law generally does not allow property rights or similar claims to be made against employees. This undermines a claim on the return on the employer fs investments in recruiting and training a worker, making them vulnerable to possible infringement from a bystander. Accordingly, employers investment in recruiting and training might become deficient. Therefore, protecting an employer fs investment, balanced against the mobility of the labor market for better employer-employee matches, has emerged as an issue in the transitory phase towards a market-based economy. We explore how the Japanese state court in its early period addressed this issue in the tight labor market of the silk-reeling industry, the leading industry then. The court first directly protected interests of employers whose employees were poached, at the expense of workers mobility. Then, it seemed to indirectly govern transactions between employers as a shadow off-the-equilibrium path. Thus, an employer whose employee was poached and an employer who dud the poaching would privately negotiate to settle the dispute, using a possible suit as a threat against the poacher. Examining suits that were actually filed leads to this hypothesis. This indirect governance facilitated labor market mobility with some protection of the original employer fs claim.

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Paper provided by Institute of Social Science, The University of Tokyo in its series ISS Discussion Paper Series (series F) with number f168.

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Length: 29 pages
Date of creation: 24 Feb 2014
Date of revision: 20 Jun 2016
Handle: RePEc:itk:issdps:f168
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  1. Suresh Naidu, 2010. "Recruitment Restrictions and Labor Markets: Evidence from the Postbellum U.S. South," Journal of Labor Economics, University of Chicago Press, vol. 28(2), pages 413-445, 04.
  2. Albert Choi & George Triantis, 2008. "Completing Contracts in the Shadow of Costly Verification," The Journal of Legal Studies, University of Chicago Press, vol. 37(2), pages 503-534, 06.
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  4. Hicks, J. R., 1969. "A Theory of Economic History," OUP Catalogue, Oxford University Press, number 9780198811633, December.
  5. Grubb, Farley, 1985. "The Market for Indentured Immigrants: Evidence on the Efficiency of Forward-Labor Contracting in Philadelphia, 1745–1773," The Journal of Economic History, Cambridge University Press, vol. 45(04), pages 855-868, December.
  6. Stevenson, Betsey & Wolfers, Justin, 2003. "Bargaining in the Shadow of the Law: Divorce Laws and Family Distress," Research Papers 1828, Stanford University, Graduate School of Business.
  7. Galenson, David W, 1981. "The Market Evaluation of Human Capital: The Case of Indentured Servitude," Journal of Political Economy, University of Chicago Press, vol. 89(3), pages 446-67, June.
  8. Tom Ginsburg & Glenn Hoetker, 2006. "The Unreluctant Litigant? An Empirical Analysis of Japan’s Turn to Litigation," The Journal of Legal Studies, University of Chicago Press, vol. 35(1), pages 31-59, 01.
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