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Labor Courts, Nomination Bias, and Unemployment in Germany

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  • Helge Berger
  • Michael Neugart

Abstract

Labor courts play an important role in determining the effective level of labor market regulation in Germany, but their application of law may not be even-handed. Based on a simple theoretical model and a new panel data set, we identify a nomination bias in labor court activity - that is, court activity varies systematically with the political leaning of the government that has appointed judges. In an extension, we find a significant positive relation between labor court activity and unemployment, even after controlling for the endogeneity of court activity. The results have potentially important policy implications regarding the independence of the judiciary and labor market reforms.

Suggested Citation

  • Helge Berger & Michael Neugart, 2006. "Labor Courts, Nomination Bias, and Unemployment in Germany," CESifo Working Paper Series 1752, CESifo.
    • Handle: RePEc:ces:ceswps:_1752
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    Cited by:

    1. Uwe Jirjahn & Jens Mohrenweiser, 2016. "Owner-Managers and the Failure of Newly Adopted Works Councils," British Journal of Industrial Relations, London School of Economics, vol. 54(4), pages 815-845, December.
    2. Lars Hornuf & Lars Klöhn, 2018. "Do Judges Hate Speculators?," CESifo Working Paper Series 7375, CESifo.
    3. Jimeno Juan F. & Martínez-Matute Marta & Mora-Sanguinetti Juan S., 2020. "Employment protection legislation, labor courts, and effective firing costs," IZA Journal of Labor Economics, Sciendo & Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 9(1), pages 1-26, January.
    4. Pierre Cahuc & Stéphane Carcillo & Bérengère Patault & Flavien Moreau, 2024. "Judge Bias in Labor Courts and Firm Performance," Journal of the European Economic Association, European Economic Association, vol. 22(3), pages 1319-1366.
    5. Hefeker, Carsten & Neugart, Michael, 2010. "Labor market regulation and the legal system," International Review of Law and Economics, Elsevier, vol. 30(3), pages 218-225, September.
    6. Potrafke, Niklas, 2013. "Minority positions in the German Council of Economic Experts: A political economic analysis," European Journal of Political Economy, Elsevier, vol. 31(C), pages 180-187.
    7. Miguel Á. Malo & Ángel Martín-Román & Alfonso Moral, 2018. "“Peer effects” or “quasi-peer effects” in Spanish labour court rulings," European Journal of Law and Economics, Springer, vol. 45(3), pages 497-525, June.
    8. Heijdra, Ben J. & Ligthart, Jenny E., 2007. "Fiscal policy, monopolistic competition, and finite lives," Journal of Economic Dynamics and Control, Elsevier, vol. 31(1), pages 325-359, January.
    9. Benoit Pierre Freyens & Paul Oslington, 2021. "The impact of unfair dismissal regulation: Evidence from an Australian natural experiment," LABOUR, CEIS, vol. 35(2), pages 264-290, June.
    10. Freyens, Benoit Pierre & Gong, Xiaodong, 2017. "Judicial decision making under changing legal standards: The case of dismissal arbitration," Journal of Economic Behavior & Organization, Elsevier, vol. 133(C), pages 108-126.
    11. Lars Hornuf & Lars Klöhn, 2019. "Do judges hate speculators?," European Journal of Law and Economics, Springer, vol. 47(2), pages 147-169, April.
    12. Goerke, Laszlo & Neugart, Michael, 2015. "Lobbying and dismissal dispute resolution systems," International Review of Law and Economics, Elsevier, vol. 41(C), pages 50-62.
    13. Ewelina Mruk & Inmaculada Aguiar-Díaz & Maria Victoria Ruiz-Mallorquí, 2019. "Use of formal insolvency procedure and judicial efficiency in Spain," European Journal of Law and Economics, Springer, vol. 47(3), pages 435-470, June.
    14. Pierre Bentata & Romain Espinosa & Yolande Hiriart, 2019. "Correction Activities by France’s Supreme Courts and Control over their Dockets," Revue d'économie politique, Dalloz, vol. 129(2), pages 169-204.
    15. Voigt, Stefan, 2012. "On the optimal number of courts," International Review of Law and Economics, Elsevier, vol. 32(1), pages 49-62.
    16. Claudia Buch & Martin Schlotter, 2013. "Regional origins of employment volatility: evidence from German states," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 40(1), pages 1-19, February.
    17. Camille Signoretto & Julie Valentin, 2019. "Individual dismissals for personal and economic reasons in French firms: One or two models?," European Journal of Law and Economics, Springer, vol. 48(2), pages 241-265, October.
    18. Booth, James Francis & Freyens, Benoit Pierre, 2014. "A study of political activism in labour courts," Economics Letters, Elsevier, vol. 123(3), pages 370-373.
    19. Freyens, Benoit Pierre & Gong, Xiaodong, 2020. "Judicial arbitration of unfair dismissal cases: The role of peer effects," International Review of Law and Economics, Elsevier, vol. 64(C).
    20. Juan F. Jimeno & Marta Martínez-Matute & Juan S. Mora-Sanguinetti, 2015. "Employment protection legislation and labor court activity in Spain," Working Papers 1507, Banco de España.
    21. Niklas Potrafke, 2013. "Minderheitsvoten im Sachverständigenrat: Eine politisch-ökonomische Analyse," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 66(09), pages 37-40, May.
    22. Robin Christmann, 2014. "No Judge, No Job! Court errors and the contingent labor contract," European Journal of Law and Economics, Springer, vol. 38(3), pages 409-429, December.

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    More about this item

    Keywords

    courts; labor courts; law production; nomination bias; unemployment; regulation; firing costs; Germany;
    All these keywords.

    JEL classification:

    • J53 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Labor-Management Relations; Industrial Jurisprudence
    • 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
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity

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