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The Economic Costs of Court Decisions Concerning Dismissals in Japan: Identification by Judge Transfers

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  • Hiroko Okudaira

    () (Graduate School of Economics, Osaka University)

Abstract

The goal of this paper is to detect the degree to which court decisions control the stringency of employment protection and 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. Specifically, I estimated the judge-specific effects from litigation records and instrumented them to the judgment indicator in the original model. A key finding in this paper is that prefecture employment rate is reduced by approximately 1.5% if a prefecture receives more pro-worker judgments than pro-employer ones in a given year. Interestingly, the result is robust to the instrumental variable estimates only if the sample includes observations of the Tokyo and Osaka Prefectures. Thus, judges assigned to these prefectures have played leading roles in exogenously establishing the doctrine of abusive adjustment dismissals, whereas the rest of the variation in judgments is reversely explained by local labor market performance.

Suggested Citation

  • Hiroko Okudaira, 2008. "The Economic Costs of Court Decisions Concerning Dismissals in Japan: Identification by Judge Transfers," Discussion Papers in Economics and Business 08-08, Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP).
  • Handle: RePEc:osk:wpaper:0808
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    File URL: http://www2.econ.osaka-u.ac.jp/library/global/dp/0808.pdf
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    Cited by:

    1. Fredrik Heyman & Per Skedinger, 2016. "Employment Protection Reform, Enforcement in Collective Agreements and Worker Flows," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 55(4), pages 662-704, October.
    2. H. Okudaira & M. Takizawa & K. Tsuru, 2013. "Employment protection and productivity: evidence from firm-level panel data in Japan," Applied Economics, Taylor & Francis Journals, vol. 45(15), pages 2091-2105, May.

    More about this item

    Keywords

    Employment Protection; Wrongful-Discharge Law; Weak Instrumental Variables;

    JEL classification:

    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings
    • K31 - Law and Economics - - Other Substantive Areas of Law - - - Labor Law
    • K41 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Litigation Process

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