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The economic costs of court decisions concerning dismissals in Japan: Identification by judge transfers

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  • Okudaira, Hiroko

Abstract

Despite its significant influence on the actual enforcement of the law, the economic cost of court discretion has generally been ignored in the literature on employment protection. This paper exploits a distinctive feature of the Japanese judicial system, periodic judge transfers, to identify court discretion. Because judges move across local labor markets, while a single national court system ensures that there are no legal boundaries between regions, it is possible to remove any confounding relationships between current litigation outcomes and local labor markets. A key finding is that an increase in the worker victory ratio in adjustment dismissal litigations reduces the rates of both job creation and destruction. Ignoring the uncertainty inherent in court decisions would lead to misspecification of the actual cost of employment protection, especially in countries with high judicial activism.

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  • Okudaira, Hiroko, 2018. "The economic costs of court decisions concerning dismissals in Japan: Identification by judge transfers," International Review of Law and Economics, Elsevier, vol. 53(C), pages 60-75.
    • Handle: RePEc:eee:irlaec:v:53:y:2018:i:c:p:60-75
    DOI: 10.1016/j.irle.2017.09.006
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    2. Okudaira, Hiroko & Takizawa, Miho & Yamanouchi, Kenta, 2019. "Minimum wage effects across heterogeneous markets," Labour Economics, Elsevier, vol. 59(C), pages 110-122.

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    More about this item

    Keywords

    Employment protection; Law enforcement; Judge effect;
    All these keywords.

    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
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law

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