Abstract

http://ssrn.com/abstract=884473
 
 

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Legal Default Rules: The Case of Wrongful Discharge Laws


W. Bentley MacLeod


Columbia University - Department of Economics; National Bureau of Economic Research (NBER); Institute for the Study of Labor (IZA)

Voraprapa Nakavachara


University of Southern California - Department of Economics

February 2006

IZA Discussion Paper No. 1970

Abstract:     
One of the most vexing public policy issues is the extent to which governments should intervene into private contractual relationships. The purpose of this paper is to explore both theoretically and empirically the extent to which such interventions may enhance efficiency. In the case of employment law, economists have traditionally taken the view that intervention, such as protection against wrongful discharge, simply undoes the original intent of the parties to the agreement. We find that both the good faith and the implied contract exceptions to employment at will may enhance employment in occupations characterized by high levels of investment. These results suggest that under the appropriate conditions courts may enhance the operation of a competitive market by setting appropriate default remedies for breach of contract.

Number of Pages in PDF File: 56

Keywords: employment law, wrongful discharge, private contracts, default rules

JEL Classification: J11, J21, J31, J61, K12, K31

working papers series


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Date posted: February 16, 2006  

Suggested Citation

MacLeod, W. Bentley and Nakavachara, Voraprapa, Legal Default Rules: The Case of Wrongful Discharge Laws (February 2006). IZA Discussion Paper No. 1970. Available at SSRN: http://ssrn.com/abstract=884473

Contact Information

William Bentley MacLeod (Contact Author)
Columbia University - Department of Economics ( email )
420 W. 118th Street
New York, NY 10027
United States
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Institute for the Study of Labor (IZA) ( email )
P.O. Box 7240
Bonn, D-53072
Germany
Voraprapa Nakavachara
University of Southern California - Department of Economics ( email )
3620 South Vermont Ave. Kaprielian (KAP) Hall, 300
Los Angeles, CA 90089
United States
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