How German Labor Courts Decide: An Econometric Case Study

Abstract:     
Courts are an important element in the institutional framework of labor markets, often determining the actual degree of employment protection. German labor courts provide a vivid example in this regard. However, we know relatively little about actual court behavior. A unique data set on German labor court verdicts reveals that social and other criteria like employee characteristics, the type of job, local labor market conditions, and court composition influence court decisions. At least as striking is that workers’ chances to win depend on where and when their cases are filed generating considerable ex-ante uncertainty about outcomes.

Keywords: labor courts, uncertainty, employment protection, labor market regulation, severance pay, firing costs, dismissals

JEL Classification: J41, J65, K31, K41

working papers series