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

The modern contract law generally does not allow a real right to be placed on employees. This constraint makes a claim to the return on employers investment in recruiting and training a worker vulnerable against a possible bystanders infringement on the claim. Accordingly, employers might tend to invest in recruiting and training less than the socially optimal level. Therefore, protection of an employers investment, balanced against mobility of the labour market for better employer-employee matches, is desired. We explore how the Japanese state court in its early period addressed this issue in the labour market of the silk-reeling industry, which led Japans industrialisation, and whose labour market was tight. The court first directly protected interests of employers whose employees were poached, at the expense of workers mobility. Then it came indirectly govern transactions between employers as a shadow off-the-equilibrium path. An employer whose employee was poached and an employer who poached privately negotiated to set tle the poaching dispute, having a possible suit move the disagreement point in favour of the employer whose employee was poached. This indirect governance enabled labour market mobility to some extent with protection of the original employers 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: 28 pages
Date of creation: 24 Feb 2014
Date of revision: 08 Oct 2015
Handle: RePEc:itk:issdps:f168
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  1. Booth, Alison L & Frank, Jeff, 1999. "Earnings, Productivity, and Performance-Related Pay," Journal of Labor Economics, University of Chicago Press, vol. 17(3), pages 447-63, July.
  2. 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.
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  4. 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.
  5. Galenson, David W., . "The Market Evaluation of Human Capital: The Case of Indentured Servitude," Working Papers 316, California Institute of Technology, Division of the Humanities and Social Sciences.
  6. Hicks, J. R., 1969. "A Theory of Economic History," OUP Catalogue, Oxford University Press, number 9780198811633.
  7. 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.
  8. 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.
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