Can Wrongful Discharge Law Enhance Employment?

W. Bentley Macleod () and Voraprapa Nakavachara

Economic Journal, 2007, vol. 117, issue 521, 218-278

Abstract: The extent of government in private contractual relationships is a vexing public policy issue. This article explores, both theoretically and empirically, the degree to which such intervention may enhance employment. Economists traditionally have held that interventions such as wrongful discharge protections simply undo the original intent of the parties to an employment contract. We find that both good faith as well as implied contract exceptions to employment-at-will may enhance employment, particularly in occupations characterised by high levels of investment and skill. This suggests that under the appropriate conditions, labour law may enhance the operation of a competitive market. Copyright 2007 The Author(s). Journal compilation Royal Economic Society 2007.

Date: 2007
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