Labor market and access to justice

In 2008, the French government enacted a reform that reduced the number of labor courts by one quarter. This led to significant changes in access to labor courts for many workers and employers who had to travel further to proceed with conflict litigation. We use this reform to evaluate how access to labor courts affects the labor market. Our empirical approach mainly relies on regression-adjusted conditional differences-in-differences estimations. We find that cities that experienced an increase in the distance to their associated labor court suffered from a lower growth rate of job creation (−4 percentage points), job destruction (−4.6 pp) and firm creation (−6.3 pp) between 2007 and 2012 compared to unaffected cities. We find opposite but insignificant effects for cities that experienced a fall in the distance to the labor court. These results emphasize the central role of labor courts for the good functioning of the labor market.