DP15399 Judge Bias in Labor Courts and Firm Performance

Author(s): Pierre Cahuc, Stéphane Carcillo, Flavien Moreau, Bérengère PATAULT
Publication Date: October 2020
Date Revised: October 2020
Keyword(s): employment, Employment protection legislation, Labor courts
JEL(s): J01, J08, K31
Programme Areas: Labour Economics, Public Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=15399

Does labor court uncertainty and judge subjectivity influence firms performance? We study the economic consequences of judge decisions by collecting information on more than 145,000 Appeal court rulings, combined with administrative firm-level records covering the whole universe of French firms. The quasi-random assignment of judges to cases reveals that judge bias has statistically significant effects on the survival, employment, and sales of small low-performing firms. However, we find that the uncertainty associated with the actual dispersion of judge bias is small and has a non-significant impact on their average outcomes.