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Labor Court Inputs, Judicial Cases Outcomes and Labor Flows: Identifying Real EPL

Henri Fraisse, Francis Kramarz () and C. Prost

Working papers from Banque de France

Abstract: Using a data set of individual labor disputes brought to court over the years 1990 to 2003 in France, we examine the impact of the enforcement of Employment Protection Legislation on labor market outcomes. First, we present a simple theoretical model showing that judicial case outcomes cannot be directly interpreted in terms of EPL. A large fraction of cases that go to trials may well be a sign of low firing costs when firms face low litigation costs and are therefore willing to go to court or a sign of high firing costs when workers face low litigation costs and are therefore willing to sue the firm. Second, we exploit our model as well as the French institutional setting to generate instruments for these endogenous outcomes. Using these instruments, we show that labor courts decisions have a causal effect on labor flows. More dropped cases and more trials cause more job destructions: more trials indeed are a sign of lower separation costs. More settlements, higher filing rates, a larger fraction of workers represented at trial, large lawyer density dampen job destruction. A larger judge density causes less job creation, in particular on the extensive margin.

Keywords: Employment protection legislation; Labor flows; Labor judges; Unfair dismissal; France (search for similar items in EconPapers)
JEL-codes: J32 J53 J63 K31 (search for similar items in EconPapers)
Pages: 50 pages
Date: 2009
New Economics Papers: this item is included in nep-lab and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11) Track citations by RSS feed

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Persistent link: https://EconPapers.repec.org/RePEc:bfr:banfra:256

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