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Multiple Equilibria in a Firing Game With Impartial Justice

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Abstract

In many European countries, a majority of employees are hired under very protective labor contracts that restrict the ability of the employer to dismiss them. In particular, employees can take to courts the firm's layoff motive. This paper analyses the interaction between firms, employees and the labor judicial system specific to South European countries. If judges' error margin increases when the judicial system is subject to congestion, the game presents multiple equilibria which differ in the frequency of workers abusively fired for personal motives. Policy implications can be inferred.

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  • Besancenot, Damien & Vranceanu, Radu, 2007. "Multiple Equilibria in a Firing Game With Impartial Justice," ESSEC Working Papers DR 07025, ESSEC Research Center, ESSEC Business School.
    • Handle: RePEc:ebg:essewp:dr-07025
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    Cited by:

    1. Cahuc, Pierre & Malherbet, Franck & Prat, Julien, 2019. "The Detrimental Effect of Job Protection on Employment: Evidence from France," IZA Discussion Papers 12384, Institute of Labor Economics (IZA).
    2. repec:got:cegedp:87 is not listed on IDEAS
    3. Baumann, Florian & Friehe, Tim, 2012. "On the evasion of employment protection legislation," Labour Economics, Elsevier, vol. 19(1), pages 9-17.
    4. Damien Besancenot & Joao R. Faria & Kim Van Huynh, 2009. "Congestion in academic journals under an impartial selection process," CEPN Working Papers halshs-00382585, HAL.
    5. Goerke, Laszlo & Pannenberg, Markus, 2010. "An economic analysis of dismissal legislation: Determinants of severance pay in West Germany," International Review of Law and Economics, Elsevier, vol. 30(1), pages 71-85, March.
    6. Besancenot, Damien & Vranceanu, Radu, 2009. "Multiple equilibria in a firing game with impartial justice," Labour Economics, Elsevier, vol. 16(3), pages 262-271, June.
    7. Fraisse, H. & Kramarz, F. & Prost, C., 2009. "Labor Court Inputs, Judicial Cases Outcomes and Labor Flows: Identifying Real EPL," Working papers 256, Banque de France.
    8. Besancenot Damien & Faria João R. & Huynh Kim V., 2014. "Congestion of Academic Journals Under Papers’ Imperfect Selection," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 14(3), pages 1145-1167, July.
    9. Damien Besancenot & Nicolas Sirven & Radu Vranceanu, 2018. "A model of hospital congestion in developing countries," Working Papers hal-01791106, HAL.

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    More about this item

    Keywords

    EPL; Labor judges; Firing costs; Layoff motive; Multiple equilibria;
    All these keywords.

    JEL classification:

    • J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions
    • 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

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