Labor Courts, Nomination Bias, and Unemployment in Germany

40 Pages Posted: 14 Jul 2006

See all articles by Helge Berger

Helge Berger

Free University Berlin - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Michael Neugart

Technical University of Darmstadt

Date Written: June 2006

Abstract

Labor courts play an important role in determining the effective level of labor market regulation in Germany, but their application of law may not be even-handed. Based on a simple theoretical model and a new panel data set, we identify a nomination bias in labor court activity - that is, court activity varies systematically with the political leaning of the government that has appointed judges. In an extension, we find a significant positive relation between labor court activity and unemployment, even after controlling for the endogeneity of court activity. The results have potentially important policy implications regarding the independence of the judiciary and labor market reforms.

Keywords: courts, labor courts, law production, nomination bias, unemployment, regulation, firing costs, Germany

JEL Classification: J53, K31, K41, E24

Suggested Citation

Berger, Helge and Neugart, Michael, Labor Courts, Nomination Bias, and Unemployment in Germany (June 2006). CESifo Working Paper Series No. 1752, Available at SSRN: https://ssrn.com/abstract=917085

Helge Berger (Contact Author)

Free University Berlin - Department of Economics ( email )

Boltzmannstr. 20
Berlin 14195, 14195
Germany
+49 30 838-54037 (Phone)
+49 30 838-52782 (Fax)

HOME PAGE: http://www.wiwiss.fu-berlin.de/berger/eng_index.htm

CESifo (Center for Economic Studies and Ifo Institute for Economic Research) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany
+49 89 9224 1266 (Phone)
+49 89 9224 1409 (Fax)

HOME PAGE: http://www.CESifo.de

Michael Neugart

Technical University of Darmstadt ( email )

Hochschulstraße 1
Darmstadt, 64289
Germany

HOME PAGE: http://www.vwl3.wi.tu-darmstadt.de

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