IDEAS home Printed from https://ideas.repec.org/p/pri/indrel/660.html
   My bibliography  Save this paper

Conflict in Dismissals

Author

Listed:
  • Pauline Carry

    (Princeton University)

  • Benjamin Schoefer

    (University of California Berkeley)

Abstract

How do the employer and the worker interact during a dismissal? This paper tests whether they cooperate to minimize costs, or instead engage in conflict—i.e., deliberately amplify costs. We leverage a unique feature of the French labor market: an employer and a worker can jointly opt to replace a costly dismissal by a cheaper and more flexible “separation by mutual agreement†(SMA). Introduced in 2008, SMAs eliminate red tape costs, enable severance pay bargaining, and preclude litigation. However, we find that only 12% of dismissals are resolved through SMAs—far below the efficient level predicted by standard bargaining models. Surveying HR directors, we identify three drivers of conflict that hinder cost minimization: (i) hostility between the employer and the employee, (ii) employers using dismissals as a “discipline device†to maintain incentives, and (iii) asymmetric beliefs about subsequent labor court outcomes. Using counterfactual scenarios in the survey, we find that removing these three drivers of conflict would increase SMA adoption from 12% to 67% of dismissals. We confirm that less conflictual dismissals—due to either better employer-employee relationships or workers benefiting from early retirement—end more often as SMAs.

Suggested Citation

  • Pauline Carry & Benjamin Schoefer, 2024. "Conflict in Dismissals," Working Papers 660, Princeton University, Department of Economics, Industrial Relations Section..
  • Handle: RePEc:pri:indrel:660
    as

    Download full text from publisher

    File URL: https://irs.princeton.edu/publications/working-papers/660
    Download Restriction: no
    ---><---

    More about this item

    JEL classification:

    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J00 - Labor and Demographic Economics - - General - - - General
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy
    • J50 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - General
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • M50 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pri:indrel:660. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Bobray Bordelon (email available below). General contact details of provider: https://edirc.repec.org/data/irprius.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.