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Dismissal Disputes and the Incentives to Bargain: Estimates of the Contract Zone

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  • Benoit P. Freyens
Abstract
In many countries the arbitration of dismissal disputes by public tribunals and state agencies is regarded as slow and expensive. Some common law countries, including the United States and Australia, are privatizing dispute resolution on the premise that this is more efficient than using statutory channels, and it is thus perceived as a better method of settling disputes. Previous advances in statutory law regarding the arbitration of dismissal disputes have been either rescinded or circumvented, sometimes with dramatic political consequences. Little is known, however, about the extent to which statutory law induces inefficiency and redistribution. The author uses settlement and arbitration cost information derived from both Australian courts and survey research for the period 2001–2008 to estimate the contract zone of average settlements, that is, the legal, stigmatic and uncertainty costs saved by averting arbitration. He finds that dispute resolution under statutory law is not as wasteful as it initially seems, nor are substantial resources redistributed from business owners to labor suppliers.

Suggested Citation

  • Benoit P. Freyens, 2011. "Dismissal Disputes and the Incentives to Bargain: Estimates of the Contract Zone," ILR Review, Cornell University, ILR School, vol. 64(3), pages 576-598, April.
    • Handle: RePEc:sae:ilrrev:v:64:y:2011:i:3:p:576-598
    DOI: 10.1177/001979391106400308
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    References listed on IDEAS

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    Cited by:

    1. Paul Latreille, 2017. "The economics of employment tribunals," IZA World of Labor, Institute of Labor Economics (IZA), pages 331-331, January.
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    3. Paul Oslington & Benoit Pierre Freyens, 2013. "A First Look at Incidence and Outcomes of Unfair Dismissal Claims under Fair Work, WorkChoices and the Workplace Relations Act," Australian Journal of Labour Economics (AJLE), Bankwest Curtin Economics Centre (BCEC), Curtin Business School, vol. 16(2), pages 295-306.
    4. Booth, James Francis & Freyens, Benoit Pierre, 2014. "A study of political activism in labour courts," Economics Letters, Elsevier, vol. 123(3), pages 370-373.

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