IDEAS home Printed from https://ideas.repec.org/a/eee/labeco/v17y2010i2p424-433.html
   My bibliography  Save this article

Labour disputes, investment decisions and the judiciary

Author

Listed:
  • Deffains, Bruno
  • Gabuthy, Yannick
  • Lambert, Eve-Angéline

Abstract

In this article, we show that the presence of the judiciary in the background of labour relationships is not neutral within these relations: its potential intervention in case of an ex-post layoff and conflict over the severance payment can promote ex-ante efficient specific investment decisions. This ability to promote efficiency depends on the judiciary's aptitude to balance out the parties' ex-post bargaining powers. Interestingly one of the results shows that, if workers' bargaining power in wage negotiations is low, which implies that they expect low returns from continuing the relationships, an increase in the exogenous layoff probability should lead judges to be less lenient towards them.

Suggested Citation

  • 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.
    • Handle: RePEc:eee:labeco:v:17:y:2010:i:2:p:424-433
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0927-5371(09)00063-3
    Download Restriction: Full text for ScienceDirect subscribers only
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Hart, Oliver D & Moore, John, 1988. "Incomplete Contracts and Renegotiation," Econometrica, Econometric Society, vol. 56(4), pages 755-785, July.
    2. Etienne Wasmer, 2006. "General versus Specific Skills in Labor Markets with Search Frictions and Firing Costs," American Economic Review, American Economic Association, vol. 96(3), pages 811-831, June.
    3. Muthoo,Abhinay, 1999. "Bargaining Theory with Applications," Cambridge Books, Cambridge University Press, number 9780521576475, November.
    4. Shavell, Steven, 1995. "The Appeals Process as a Means of Error Correction," The Journal of Legal Studies, University of Chicago Press, vol. 24(2), pages 379-426, June.
    5. Bentley W. MacLeod, 2003. "Optimal Contracting with Subjective Evaluation," American Economic Review, American Economic Association, vol. 93(1), pages 216-240, March.
    6. Edward P. Lazear, 1990. "Job Security Provisions and Employment," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 105(3), pages 699-726.
    7. Samuel Bentolila & Giuseppe Bertola, 1990. "Firing Costs and Labour Demand: How Bad is Eurosclerosis?," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 57(3), pages 381-402.
    8. W. Bentley MacLeod & Voraprapa Nakavachara, 2007. "Can Wrongful Discharge Law Enhance Employment?," Economic Journal, Royal Economic Society, vol. 117(521), pages 218-278, June.
    9. Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, 1998. "Law and Finance," Journal of Political Economy, University of Chicago Press, vol. 106(6), pages 1113-1155, December.
    10. Olivier Blanchard & Jean Tirole, 2004. "Redesigning the Employment Protection System," De Economist, Springer, vol. 152(1), pages 1-20, March.
    11. Ichino, Andrea & Polo, Michele & Rettore, Enrico, 2003. "Are judges biased by labor market conditions?," European Economic Review, Elsevier, vol. 47(5), pages 913-944, October.
    12. Hart, Oliver, 1995. "Firms, Contracts, and Financial Structure," OUP Catalogue, Oxford University Press, number 9780198288817.
    13. Michèle Belot & Jan Boone & Jan Van Ours, 2007. "Welfare‐Improving Employment Protection," Economica, London School of Economics and Political Science, vol. 74(295), pages 381-396, August.
    14. MacLeod, W Bentley & Malcomson, James M, 1993. "Investments, Holdup, and the Form of Market Contracts," American Economic Review, American Economic Association, vol. 83(4), pages 811-837, September.
    15. Nicola Gennaioli & Andrei Shleifer, 2008. "Judicial Fact Discretion," The Journal of Legal Studies, University of Chicago Press, vol. 37(1), pages 1-35, January.
    16. Jens Suedekum & Peter Ruehmann, 2003. "Severance Payments and Firm–specific Human Capital," LABOUR, CEIS, vol. 17(1), pages 47-62, March.
    17. Goerke, Laszlo & Pannenberg, Markus, 2009. "The effects of income taxation on severance pay," Labour Economics, Elsevier, vol. 16(1), pages 107-118, January.
    18. Jean Tirole, 1999. "Incomplete Contracts: Where Do We Stand?," Econometrica, Econometric Society, vol. 67(4), pages 741-782, July.
    19. James M. Malcomson, 1997. "Contracts, Hold-Up, and Labor Markets," Journal of Economic Literature, American Economic Association, vol. 35(4), pages 1916-1957, December.
    20. John T. Addison & Paulino Teixeira, 2003. "The Economics of Employment Protection," Journal of Labor Research, Transaction Publishers, vol. 24(1), pages 85-129, January.
    21. Miguel Á. Malo, 2000. "A Simple Model of Severance Pay Determination: The Case of Individual Dismissals in Spain," LABOUR, CEIS, vol. 14(2), pages 269-290, June.
    22. James M. Malcomson, 1997. "Contracts, Hold-Up, and Labor Markets," Journal of Economic Literature, American Economic Association, vol. 35(4), pages 1916-1957, December.
    23. Andrew F. Daughety & Jennifer F. Reinganum, 2000. "Appealing Judgments," RAND Journal of Economics, The RAND Corporation, vol. 31(3), pages 502-526, Autumn.
    24. Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-444, June.
    25. Arthur J. Hosios, 1990. "On The Efficiency of Matching and Related Models of Search and Unemployment," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 57(2), pages 279-298.
    26. Steven Shavell, 2006. "The Appeals Process and Adjudicator Incentives," The Journal of Legal Studies, University of Chicago Press, vol. 35(1), pages 1-29, January.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Yannick Gabuthy & Eve-Angéline Lambert & Lionel Thomas, 2013. "Severance Payment: Incentive or Lethargy Effect?," Scottish Journal of Political Economy, Scottish Economic Society, vol. 60(1), pages 43-55, February.
    2. Boeri, Tito & Garibaldi, Pietro & Moen, Espen R., 2017. "Inside severance pay," Journal of Public Economics, Elsevier, vol. 145(C), pages 211-225.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Bruno Deffains & Yannick Gabuthy & Eve-Angéline Lambert, 2007. "Labor Conflicts and Inefficiency of Relationship-Specific Investments: What is the Judge's Role?," Working Papers of BETA 2007-04, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
    2. Yannick Gabuthy & Eve-Angéline Lambert & Lionel Thomas, 2013. "Severance Payment: Incentive or Lethargy Effect?," Scottish Journal of Political Economy, Scottish Economic Society, vol. 60(1), pages 43-55, February.
    3. repec:eee:labchp:v:3:y:1999:i:pb:p:2291-2372 is not listed on IDEAS
    4. MacLeod, W. Bentley, 2011. "Great Expectations: Law, Employment Contracts, and Labor Market Performance," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 4, chapter 18, pages 1591-1696, Elsevier.
    5. Ohlendorf, Susanne & Schmitz, Patrick, 2009. "Signaling an Outside Option," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 281, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
    6. Boeri, Tito & Garibaldi, Pietro & Moen, Espen R., 2017. "Inside severance pay," Journal of Public Economics, Elsevier, vol. 145(C), pages 211-225.
    7. Fella Giulio, 2012. "Matching, Wage Rigidities and Efficient Severance Pay," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 12(1), pages 1-35, December.
    8. Andrea Ricci & Robert Waldmann, 2015. "Firm financed training and pareto improving firing taxes," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 32(2), pages 201-220, August.
    9. Tang, Heiwai, 2012. "Labor market institutions, firm-specific skills, and trade patterns," Journal of International Economics, Elsevier, vol. 87(2), pages 337-351.
    10. Bernard Baudry & Bruno Tinel, 2003. "Une analyse théorique des fondements et du fonctionnement de la relation d'autorité intrafirme," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00270902, HAL.
    11. de Meza, David & Lockwood, Ben, 2004. "Too Much Investment: A Problem of Coordination Failure," Economic Research Papers 269597, University of Warwick - Department of Economics.
    12. Charlot, Olivier & Malherbet, Franck, 2013. "Education and employment protection," Labour Economics, Elsevier, vol. 20(C), pages 3-23.
    13. Fella, Giulio, 2005. "Termination restrictions and investment in general training," European Economic Review, Elsevier, vol. 49(6), pages 1479-1499, August.
    14. Andrea Bassanini & Luca Nunziata & Danielle Venn, 2009. "Job protection legislation and productivity growth in OECD countries [Appropriate growth policy: a unifying framework]," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 24(58), pages 349-402.
    15. Stähler, Nikolai, 2008. "Firing costs, severance payments, judicial mistakes and unemployment," Labour Economics, Elsevier, vol. 15(6), pages 1162-1178, December.
    16. Goerke, Laszlo & Neugart, Michael, 2015. "Lobbying and dismissal dispute resolution systems," International Review of Law and Economics, Elsevier, vol. 41(C), pages 50-62.
    17. Cardullo, Gabriele & Conti, Maurizio & Sulis, Giovanni, 2015. "Sunk capital, unions and the hold-up problem: Theory and evidence from cross-country sectoral data," European Economic Review, Elsevier, vol. 76(C), pages 253-274.
    18. Ahrens, Steffen & Wesselbaum, Dennis, 2009. "On the introduction of firing costs," Kiel Working Papers 1559, Kiel Institute for the World Economy (IfW Kiel).
    19. repec:eee:labchp:v:3:y:1999:i:pb:p:2373-2437 is not listed on IDEAS
    20. E. Galdon-Sanchez, Jose & Guell, Maia, 2003. "Dismissal conflicts and unemployment," European Economic Review, Elsevier, vol. 47(2), pages 323-335, April.
    21. Kjell Erik Lommerud & Odd Rune Straume & Steinar Vagstad, 2018. "Employment Protection and Unemployment Benefits: On Technology Adoption and Job Creation in a Matching Model," Scandinavian Journal of Economics, Wiley Blackwell, vol. 120(3), pages 763-793, July.
    22. Isa Camyar & Bahar Ulupinar, 2019. "Electoral systems and the economy: a firm-level analysis," Constitutional Political Economy, Springer, vol. 30(1), pages 1-30, March.

    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:eee:labeco:v:17:y:2010:i:2:p:424-433. 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.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with 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: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/labeco .

    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.