Are Judges Biased by Labor Market Conditions? The Selection of Firing Litigations for Trial in an Italian Firm

44 Pages Posted: 22 May 2001

See all articles by Andrea Ichino

Andrea Ichino

University of Bologna

Michele Polo

Bocconi University - Department of Economics

Enrico Rettore

University of Trento; IRVAPP; IZA

Date Written: May 2001

Abstract

When a firing litigation is taken to court, only the characteristics of the employees' misconduct should be relevant for the judge's decision. Using data from an Italian bank this Paper shows that, instead, local labor market conditions influence the court's decision: the same misconduct episode may be considered sufficient for firing in a tight labor market but insufficient otherwise. This finding is obtained after taking carefully into consideration the non random selection of firing litigation for trial. The existence of a judge's bias is relevant for at least two research fields. For macroeconomists it suggests that higher unemployment rates may increase firing costs via the effect on courts' decision criteria; thus, the real extent of firing rigidities cannot be assessed without considering the role of courts. For labor law scholars, this finding is important because, following traditional principles, the law should be applied in the same way for all citizens and over the entire national territory.

Keywords: Internal labor relations, conflict resolutions, firing costs

JEL Classification: J41, J49, J52, J65

Suggested Citation

Ichino, Andrea and Polo, Michele and Rettore, Enrico, Are Judges Biased by Labor Market Conditions? The Selection of Firing Litigations for Trial in an Italian Firm (May 2001). CEPR Discussion Paper No. 2804. Available at SSRN: https://ssrn.com/abstract=270715

Andrea Ichino (Contact Author)

University of Bologna ( email )

Piazza Scaravilli 1
40126 Bologna, fc 47100
Italy
+39 349 5965919 (Phone)

Michele Polo

Bocconi University - Department of Economics ( email )

Via Gobbi 5
Milan, 20136
Italy

Enrico Rettore

University of Trento ( email )

Via Verdi 26
Trento, 28122
Italy
+39 0461 281316 (Phone)

IRVAPP ( email )

Via Santa Croce 77
Trento, I-38122
Italy

IZA ( email )

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