Layoffs and Litigation

Posted: 5 Jun 2000

See all articles by Paul Oyer

Paul Oyer

Stanford Graduate School of Business; National Bureau of Economic Research (NBER)

Scott Schaefer

University of Utah - Department of Finance

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We study a possible link between two recent U.S. labor market trends: increased wrongful termination litigation and more frequent mass layoffs. We argue that if workers are more likely to sue when fired than when dismissed as part of a layoff, then increases in the expected costs to firms of such suits should induce substitution toward layoffs and away from individual firings. Our empirical analysis supports this assertion, showing that shortly after the passage of the Civil Rights Act of 1991, the methods of displacement changed differently by race but changes to the overall level of displacement were consistent across races.

JEL Classification: D21, J21, K31, M12

Suggested Citation

Oyer, Paul and Schaefer, Scott, Layoffs and Litigation. Available at SSRN:

Paul Oyer (Contact Author)

Stanford Graduate School of Business ( email )

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National Bureau of Economic Research (NBER)

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Scott Schaefer

University of Utah - Department of Finance ( email )

David Eccles School of Business
Salt Lake City, UT 84112
United States

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