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Judge Bias in Labor Courts and Firm Performance

Author

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  • Pierre Cahuc

    (ECON - Département d'économie (Sciences Po) - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique, IZA - Forschungsinstitut zur Zukunft der Arbeit - Institute of Labor Economics, CEPR - Center for Economic Policy Research)

  • Stéphane Carcillo

    (ECON - Département d'économie (Sciences Po) - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique, IZA - Forschungsinstitut zur Zukunft der Arbeit - Institute of Labor Economics)

  • Bérangère Patault

    (UvA - University of Amsterdam [Amsterdam] = Universiteit van Amsterdam)

  • Flavien Moreau

    (IMF - "Research Department International Monetary Fund (IMF)" - International Monetary Fund (IMF))

Abstract

Does judge subjectivity in labor courts influence firm performance? We study the economic consequences of judge decisions by collecting information on Appeal court rulings, combined with administrative firm-level records covering the whole universe of French firms. The quasi-random assignment of judges to cases reveals that judge bias, defined as judge-specific differences on granting compensation for wrongful dismissal, has statistically significant effects on the survival and employment of small firms, especially among very small and low-performing ones. When compensation for wrongful dismissal is instrumented by judge bias, an increase in compensation of 1 percent of the payroll reduces employment growth by 5 percentage points after 3 years for those firms.

Suggested Citation

  • Pierre Cahuc & Stéphane Carcillo & Bérangère Patault & Flavien Moreau, 2022. "Judge Bias in Labor Courts and Firm Performance," SciencePo Working papers Main hal-03881619, HAL.
    • Handle: RePEc:hal:spmain:hal-03881619
    Note: View the original document on HAL open archive server: https://sciencespo.hal.science/hal-03881619v1
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    References listed on IDEAS

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    Cited by:

    1. Claudine Desrieux & Romain Espinosa & Michael Visser, 2022. "Simultaneous Decision Making of Juries: Evidence From the Paris Labor Court," Working Papers hal-04104190, HAL.

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    More about this item

    Keywords

    Dismissal compensation; Judge bias; Firm survival; Employment;
    All these keywords.

    JEL classification:

    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings

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