 |
Are Pro-Worker Judges Detrimental to Firm Survival and Employment?
1 : Centre de Recherche en Économie et Statistique
(CREST)
Ecole Nationale de la Statistique et de l\'Analyse de l\'Information [Bruz], Ecole Polytechnique, École Nationale de la Statistique et de l'Administration Économique, Centre National de la Recherche Scientifique : UMR9194, Ecole Nationale de la Statistique et de l\'Analyse de l\'Information [Bruz], Ecole Nationale de la Statistique et de l\'Analyse de l\'Information [Bruz], Ecole Nationale de la Statistique et de l\'Analyse de l\'Information [Bruz], Ecole Nationale de la Statistique et de l\'Analyse de l\'Information [Bruz], Ecole Nationale de la Statistique et de l\'Analyse de l\'Information [Bruz], Ecole Nationale de la Statistique et de l\'Analyse de l\'Information [Bruz]
5, Avenue Henry Le Chatelier91120 Palaiseau -
France
2 : Département d\'économie, Sciences Po
Sciences Po
3 : Organisation de Coopération et de Développement Economiques
(OCDE)
* : Corresponding author
Organisation de Coopération et de Développement Economiques
2, rue André Pascal 75775 Paris Cedex 16 -
France
In European countries, recent reforms of employment protection legislation aimed at reducing the supposedly differentiated treatment by judges of compensations for wrongful dismissal, supposed to be detrimental to employment and to the survival of small firms. However, there is only anecdotal evidence on this issue. To fill this gap, this paper provides new information about 55,000 Appeal Court decisions merged with administrative firm-level records covering all the universe of French firms. The quasi-random assignment of judges to cases reveals that judges bias has statistically significant effects on the survival, employment and hires of small low performing firms. Such results are consistent with the standard effect of the level of firing compensation on worker flows. We go one step further and provide novel insights about the effects of the variability of compensations: setting all judges biases at the mean - i.e. eliminating any judge-related dispersion - would decrease the liquidation probability of small low performing firms within 3 years after the judgment by 5% (i.e. 0.3 percentage point) and would increase their employment growth by 14% (i.e 2.2 percentage points).
