Damages or Reinstatement: Incentives and Remedies for Unjust Dismissal
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Kyota Eguchi
We consider a simple employment contract model to analyze the difference between two remedies for unjust dismissals: damages vs. reinstatement. The bargaining power of workers in the reinstatement case is stronger in severe recessions than it is in the damages case. In contrast, reinstatement worsens the bargaining position of workers in moderately severe recessions than do damages, and hence, the payoff for workers in the reinstatement case is greater in severe recessions and lower in moderately severe recessions than it is in the damages case. A higher payoff in the severe state causes serious damage to workers' incentives because shirking behavior is more attractive under the reinstatement policy. Firms are more likely to fire workers in the reinstatement case than in the damages case. Since there is a transaction cost with employment adjustment, damages are better than reinstatement from the viewpoint of workers’ incentives.
©2011 Walter de Gruyter GmbH & Co. KG, Berlin/Boston
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- Theory Meets Practice: Barriers to Entry in Merger Analysis
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- Attorneys' Compensation in Litigation with Bilateral Delegation
- The Paradox of Expected Punishment: Legal and Economic Factors Determining Success and Failure in the Fight against Organized Crime
- The Biasing Effects of Memory Distortions on the Process of Legal Decision-Making
- Transaction Costs, Neighborhood Effects, and the Diffusion of the Uniform Sales Act, 1906-47
- A Note on the Social versus Private Value of Suits when Care is Bilateral
- The Hidden Bias of the Vienna Convention on the International Law of Treaties
- Differential Victimization: Efficiency and Fairness Justifications for the Felony Murder Rule
- Underpricing of IPOs and Legal Frameworks Around the World
- Damages or Reinstatement: Incentives and Remedies for Unjust Dismissal
- Jury Verdicts in Drunken Driving Cases
- The Market for Lawyers and Social Capital: Are Informal Rules a Substitute for Formal Ones?
- Competition and Unitization in Oil Extraction: A Tale of Two Tragedies
Artikel in diesem Heft
- Article
- Paying the Price for Being Caught: The Economics of Manifest and Non-Manifest Theft in Roman Law
- Measuring Skill in Games with Random Payoffs: Evaluating Legality
- Timing of Crime, Learning and Sanction
- Controlling Avoidance: Ex Ante Regulation Versus Ex Post Punishment
- Damages for Breach of Contract, Impossibility of Performance and Legal Enforceability
- Social Norms, Self-Interest and Ambiguity of Legal Norms: An Experimental Analysis of the Rule vs. Standard Dilemma
- Frischmann's View of "Toward a Theory of Property Rights"
- Causation and Incentives to Choose Levels of Care and Activity Under the Negligence Rule
- A Positive Theory of Strict Liability
- Theory Meets Practice: Barriers to Entry in Merger Analysis
- Expert Testimony, Daubert, and the Determination of Damages
- Split-Estate Negotiations: The Case of Coal-Bed Methane
- Attorneys' Compensation in Litigation with Bilateral Delegation
- The Paradox of Expected Punishment: Legal and Economic Factors Determining Success and Failure in the Fight against Organized Crime
- The Biasing Effects of Memory Distortions on the Process of Legal Decision-Making
- Transaction Costs, Neighborhood Effects, and the Diffusion of the Uniform Sales Act, 1906-47
- A Note on the Social versus Private Value of Suits when Care is Bilateral
- The Hidden Bias of the Vienna Convention on the International Law of Treaties
- Differential Victimization: Efficiency and Fairness Justifications for the Felony Murder Rule
- Underpricing of IPOs and Legal Frameworks Around the World
- Damages or Reinstatement: Incentives and Remedies for Unjust Dismissal
- Jury Verdicts in Drunken Driving Cases
- The Market for Lawyers and Social Capital: Are Informal Rules a Substitute for Formal Ones?
- Competition and Unitization in Oil Extraction: A Tale of Two Tragedies
