Judge Bias in Labor Courts and Firm Performance

Pierre Cahuc (), Stéphane Carcillo, Bérengère Patault and Flavien Moreau
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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: OCDE / OECD - Organisation de Coopération et de Développement Economiques = Organisation for Economic Co-operation and Development, ECON - Département d'économie (Sciences Po) - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique
Bérengère Patault: UvA - Universiteit van Amsterdam = University of Amsterdam
Flavien Moreau: International Monetary Fund (IMF)

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Abstract: This paper documents the existence of judge-specific differences on granting compensation for wrongful dismissal and shows that their consequences are different for small low-performing firms than for other firms. Pro-worker judge bias reduces job creation for all firms, increases the destruction of permanent jobs in small and low-performing firms but reduces it in large high-performing firms. Pro-worker bias reduces employment and survival for small and low-performing firms but has no significant effects on these outcomes for the other firms. The probability that permanent incumbent workers keep their job in firms judged by a pro-worker judge increases in large and high-performing firms, while it decreases in small, poorly performing firms.

Keywords: Employment; Firm survival; Judge bias; Dismissal compensation (search for similar items in EconPapers)
Date: 2024-06-06
Note: View the original document on HAL open archive server: https://sciencespo.hal.science/hal-05446842v1
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Published in Journal of the European Economic Association, 2024, Journal of the European Economic Association, 22 (3), pp.1319-1366. ⟨10.1093/jeea/jvad046⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:spmain:hal-05446842

DOI: 10.1093/jeea/jvad046

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