An Empirical Investigation of Settlement & Litigation - The Case of Taiwan Labor Disputes

31 Pages Posted: 17 Jul 2009 Last revised: 17 Nov 2009

See all articles by Kuo‐Chang Huang

Kuo‐Chang Huang

Institutum Iurisprudentiae

Kong-Pin Chen

Academia Sinica - Research Center for Humanities and Social Sciences; National Taiwan University - Department of Economics

Chang‐Ching Lin

National Cheng Kung University

Date Written: July 14, 2009

Abstract

Using newly collected data on the labor dispute in Taiwan, we study the selection process of cases settled out of court, cases dropped after settlement fails, and cases actually brought to the court. We find that the size of the stakes plays an important role in the interrelation between settlement and litigation. In particular, our study shows that increasing stakes would decrease the probability of settlement, decrease the recovery rate in settlement, and increase the probability of litigation after settlement fails. The result of our empirical analysis indicates that while the plaintiff’s creditability of threatening a lawsuit is an important issue, this credibility issue is not so important as to undermine the pattern that an increase in the stakes would decrease the likelihood of settlement. Our study also reveals that the mediation mechanism performs the function of allowing workers with small claims to obtain effective recovery, which would have been impossible if those workers had to resort to litigation. This result also suggests that the traditional models are inadequate in explaining the settlement mechanism of disputes involving small claims. Finally, we find that the workers’ risk-aversion might cause their recovery rate in settlement drops as the amount of their initial claims increase.

Keywords: settlement and litigation, economic analysis of law, labor dispute, case selection

JEL Classification: K00; K40; K31

Suggested Citation

Huang, Kuo-Chang and Chen, Kong-Pin and Lin, Chang-Ching, An Empirical Investigation of Settlement & Litigation - The Case of Taiwan Labor Disputes (July 14, 2009). CELS 2009 4th Annual Conference on Empirical Legal Studies Paper. Available at SSRN: https://ssrn.com/abstract=1433683 or http://dx.doi.org/10.2139/ssrn.1433683

Kuo-Chang Huang (Contact Author)

Institutum Iurisprudentiae ( email )

Nankang
Taipei, 11529
Taiwan
886-2-26525419 (Phone)
886-2-27859471 (Fax)

Kong-Pin Chen

Academia Sinica - Research Center for Humanities and Social Sciences ( email )

RCHSS
Academia Sinica
Nankang, Taipei, 11529
Taiwan
886 2 2789 8160 (Phone)
886 2 2785 4160 (Fax)

HOME PAGE: http://idv.sinica.edu.tw/kongpin/

National Taiwan University - Department of Economics

21 Hsiu Chow Rd
Taipei, 10020
Taiwan

Chang-Ching Lin

National Cheng Kung University ( email )

No.1, University Road
Tainan
Taiwan

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