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Labor Conflicts and Inefficiency of Relationship-Specific Investments: What is the Judge's Role?

Bruno Deffains, Yannick Gabuthy () and Eve-Angeline Lambert

Working Papers of BETA from Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg

Abstract: This paper presents a model of litigation in the context of a labor contract. The main objective of our analysis is to determine whether and under which conditions it is efficient that the judiciary arbiters a labor conflict and how the judge's decision should be made in order to be optimal. We embed this idea by considering a relationship between an employer and his worker, in which they can make (non contractible) relationship-specific investments. The optimality here refers to the best investment incentives of the parties allowing to maximize the generated surplus. We derive conclusions about the judge's behavior giving right investment incentives and determine how the division of the surplus should vary depending on several economic and social parameters.

Keywords: Labor Law; Litigation; Investment Incentives; Bargaining. (search for similar items in EconPapers)
JEL-codes: C78 K31 K41 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-law and nep-reg
Date: 2007
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Persistent link: https://EconPapers.repec.org/RePEc:ulp:sbbeta:2007-04

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