Analyse du cout des ruptures de contrat de travail

Stéphane Carcillo, Pierre Cahuc, Bérengère Patault

In European countries, recent reforms of employment protection legislation aimed at reducing the supposedly differentiated treatment by judges of compensation for wrongful dismissal, supposed to be detrimental to employment and to the survival of small firms. However, there is only anecdotal evidence on this issue. To fill this gap, this paper provides new information about 55,000 Appeal Court decisions merged with administrative firm-level records covering all the universe of French firms. The quasi-random assignment of judges to cases reveals that judges worker bias has a statistically significant impact on employment, hires, and survival of small low performing firms, whose return on assets is below the median, but no effect on other firms. Counter-factual exercises show that capping judges pro-worker biases at the median would decrease the judicial liquidation probability of small low performing firms within 3 years after the judgment by 14% (i.e. one percentage point) and would increase their employment growth by 6% (i.e. 2 percentage points). Setting all biases at the median has much smaller effects: the liquidation probability of low performing firms would increase by 6% (i.e 0.4 percentage point) at a 3-year horizon with negligible effects on employment growth.