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Can Wrongful Discharge Law Enhance Employment?

Author

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  • W. Bentley MacLeod
  • Voraprapa Nakavachara

Abstract

The extent of government in private contractual relationships is a vexing public policy issue. This article explores, both theoretically and empirically, the degree to which such intervention may enhance employment. Economists traditionally have held that interventions such as wrongful discharge protections simply undo the original intent of the parties to an employment contract. We find that both good faith as well as implied contract exceptions to employment-at-will may enhance employment, particularly in occupations characterised by high levels of investment and skill. This suggests that under the appropriate conditions, labour law may enhance the operation of a competitive market. Copyright 2007 The Author(s). Journal compilation Royal Economic Society 2007.

Suggested Citation

  • W. Bentley MacLeod & Voraprapa Nakavachara, 2007. "Can Wrongful Discharge Law Enhance Employment?," Economic Journal, Royal Economic Society, vol. 117(521), pages 218-278, June.
    • Handle: RePEc:ecj:econjl:v:117:y:2007:i:521:p:218-278
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    Citations

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    Cited by:

    1. Filippo Belloc, 2015. "Employee Representation Legislations and Innovation," Department of Economics University of Siena 719, Department of Economics, University of Siena.
    2. Morelli, Massimo & Ash, Elliott & Vannoni, Matia, 2022. "More Laws, More Growth? Evidence from U.S. States," CEPR Discussion Papers 15629, C.E.P.R. Discussion Papers.
    3. Filippo Belloc, 2019. "Labor Conflict at the Workplace: Do Dismissal Regulations Matter?," Department of Economics University of Siena 806, Department of Economics, University of Siena.
    4. Sarkar, Prabirjit, 2020. "Does labor regulation reduce total and youth employment?," Structural Change and Economic Dynamics, Elsevier, vol. 52(C), pages 374-381.
    5. Simon Jäger & Shakked Noy & Benjamin Schoefer, 2022. "What Does Codetermination Do?," ILR Review, Cornell University, ILR School, vol. 75(4), pages 857-890, August.
    6. Barceló, Cristina & Villanueva, Ernesto, 2016. "The response of household wealth to the risk of job loss: Evidence from differences in severance payments," Labour Economics, Elsevier, vol. 39(C), pages 35-54.
    7. Maria De Paola & Roberto Nisticò & Vincenzo Scoppa, 2020. "Fertility Decisions And Employment Protection: The Unintended Consequences Of The Italian Jobs Act," Working Papers 202003, Università della Calabria, Dipartimento di Economia, Statistica e Finanza "Giovanni Anania" - DESF.
    8. Elliott Ash & W. Bentley MacLeod, 2015. "Intrinsic Motivation in Public Service: Theory and Evidence from State Supreme Courts," Journal of Law and Economics, University of Chicago Press, vol. 58(4).
    9. Deffains, Bruno & Gabuthy, Yannick & Lambert, Eve-Angéline, 2010. "Labour disputes, investment decisions and the judiciary," Labour Economics, Elsevier, vol. 17(2), pages 424-433, April.
    10. Desheng Yin & Xinting Zhen, 2021. "Employment Protection and Banking Power: Evidence from Adoption of Wrongful Discharge Laws," Sustainability, MDPI, vol. 13(4), pages 1-22, February.
    11. Lawrence M. Kahn, 2012. "Labor market policy: A comparative view on the costs and benefits of labor market flexibility," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 31(1), pages 94-110, December.
    12. Ahmad, Muhammad Farooq & Lambert, Thomas, 2019. "Collective bargaining and mergers and acquisitions activity around the world," Journal of Banking & Finance, Elsevier, vol. 99(C), pages 21-44.
    13. Petar Stankov, 2018. "Deregulation, Economic Growth and Growth Acceleration," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 43(4), pages 21-40, December.
    14. Juan J. Dolado & Salvador Ortigueira & Rodolfo Stucchi, 2016. "Does dual employment protection affect TFP? Evidence from Spanish manufacturing firms," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 7(4), pages 421-459, November.
    15. Viral V. Acharya & Ramin P. Baghai & Krishnamurthy V. Subramanian, 2013. "Labor Laws and Innovation," Journal of Law and Economics, University of Chicago Press, vol. 56(4), pages 997-1037.
    16. Olsson, Martin, 2009. "Employment protection and sickness absence," Labour Economics, Elsevier, vol. 16(2), pages 208-214, April.
    17. Belloc, Filippo, 2021. "Industrial actions and firing regimes: How deregulating worker “Exit” reshapes worker “Voice”," Structural Change and Economic Dynamics, Elsevier, vol. 56(C), pages 251-264.
    18. Bjuggren, Carl Magnus & Skedinger, Per, 2018. "Does Job Security Hamper Employment Prospects?," Working Paper Series 1255, Research Institute of Industrial Economics.
    19. Filippo Belloc, 2015. "Employee Representation Legislations and Innovation," Department of Economics University of Siena 719, Department of Economics, University of Siena.
    20. Baumann, Florian & Friehe, Tim, 2012. "On the evasion of employment protection legislation," Labour Economics, Elsevier, vol. 19(1), pages 9-17.
    21. Domenico Lisi & Miguel A. Malo, 2017. "The impact of temporary employment on productivity [Auswirkungen befristeter Beschäftigung auf die Produktivität]," Journal for Labour Market Research, Springer;Institute for Employment Research/ Institut für Arbeitsmarkt- und Berufsforschung (IAB), vol. 50(1), pages 91-112, August.
    22. Kahn, Lawrence M., 2012. "Temporary jobs and job search effort in Europe," Labour Economics, Elsevier, vol. 19(1), pages 113-128.
    23. Christof Beuselinck & Garen Markarian & Arnt Verriest, 2021. "Employee protection shocks and corporate cash holdings," Post-Print hal-03597869, HAL.
    24. Beuselinck, Christof & Markarian, Garen & Verriest, Arnt, 2021. "Employee protection shocks and corporate cash holdings," Journal of Corporate Finance, Elsevier, vol. 69(C).
    25. Krishnamurthy V. Subramanian, 2018. "Dismissal Laws, Innovation and Economic Growth," Working Papers id:12794, eSocialSciences.

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