Legal default rules: the case of wrongful discharge laws

Arbeitspapier

One of the most vexing public policy issues is the extent to which governments should intervene into private contractual relationships. The purpose of this paper is to explore both theoretically and empirically the extent to which such interventions may enhance efficiency. In the case of employment law, economists have traditionally taken the view that intervention, such as protection against wrongful discharge, simply undoes the original intent of the parties to the agreement. We find that both the good faith and the implied contract exceptions to employment at will may enhance employment in occupations characterized by high levels of investment. These results suggest that under the appropriate conditions courts may enhance the operation of a competitive market by setting appropriate default remedies for breach of contract.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: IZA Discussion Papers ; No. 1970

Classification and Topics

• Classification: Wirtschaft ; Demographic Trends, Macroeconomic Effects, and Forecasts ; Labor Force and Employment, Size, and Structure ; Wage Level and Structure; Wage Differentials ; Geographic Labor Mobility; Immigrant Workers ; Contract Law ; Labor Law
• Subject: employment law ; wrongful discharge ; private contracts ; default rules

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): MacLeod, W. Bentley ; Nakavachara, Voraprapa
• Event: Veröffentlichung
• (who): Institute for the Study of Labor (IZA)
• (where): Bonn
• (when): 2006

Further information

• Handle: http://hdl.handle.net/10419/33219
• Last update: 10.03.2025, 11:42 AM CET