The (Other) Effects of Restricting Access to Higher Courts: The Case of Wrongful Terminations in Labor Contracts in Chile

Álvaro Bustos, Pablo Bravo-Hurtado and Antonio Aninat

No 534, Documentos de Trabajo from Instituto de Economia. Pontificia Universidad Católica de Chile.

Abstract: It is commonly argued that the case overload faced by higher courts (especially in civil law) can be reduced by restricting access to them. In this paper we prove that such restriction can also significantly reduce judicial uniformity among lower courts and alter litigation decisions as well as outcomes. To test our predictions we build a database of wrongful termination lawsuits that took place before and after the implementation of a reform to the Chilean labor justice system. This reform exogenously and drastically reduced access to higher courts. As we predict, this reduction increased the probability of a first-instance pro-plaintiff decision (by 36%); increased the percentage recovered by a plaintiff in court (by 27%) and reduced the probability of a settlement (by 16%). The Priest & Klein 50% hypothesis suggests that prior to the reform plaintiffs recovered too little. Policy implications follow.

Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:ioe:doctra:534

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