Referee home bias

Referees are supposed to be impartial. In academics, this is most of the time helped by the fact that they are anonymous. In sports, referees are public and meeting participants, including spectators, try to influence them. This becomes particularly relevant when the referee has to take a decision against the home team than leaves spectators irate. They could retaliate against him. Does this influence referees?


Andrés Picazo-Tadeo, Francisco Gónzalez-Gómez and Jorge Guardiola Wanden-Berghe look at first division football in Spain, carefully taking into account stadium capacity, how full it is, how far spectators are from the pitch, and referee experience. They find that awarding a free kick does not have a home bias, which is consistent with the fact that this is a split-second decision. The ensuing decision to give the offending player a caution is, however, affected by home bias. This decision is not instantaneous, and social pressure can be exerted on the referee, especially when the stadium is full. The presence of a running track that separates the local supporters form the action does not seem to matter, though. I wonder whether some teams have a larger home bias than others, as the fans' reputation could also influence referees.

Spain: how to mess with the labor market

Spain has long been a puzzle because of its abnormally high employment rate, in particular among the young. But things seem to have rectified themselves somewhat since Spain got more integrated into the European market, which unemployment rates comparable to France. But the last recession turned out to be a disaster, with the unemployment rate increasing by 11% points, compared to 2% points in France. What is wrong with Spain? For one, there was a spectacular drop in activity in th construction sector, which initially accounted for a sixth of GDP and was basically divided by six.

Samuel Bentolila, Pierre Cahuc, Juan Dolado and Thomas Le Barbanchon claim that there is also a serious issue with labor market institutions. While both France and Spain have extensive employment protection legislation, and severance pay is formally higher in France, Spain requires, for example, administrative approval for collective dismissals of over 10% of the workforce. Such approval can only be obtained by collective bargaining and much higher severance pay. While severance pay is usually not problematic (it is accounted for in wages), it is the red-tape associated with this and the hoops firms that firms need to go through to dismiss that become economically relevant, because these are transfers that captured by a third party: administration. This makes it then very costly to hire someone, given expected firing costs, and especially so in uncertain times.

Using a search and matching model, Bentolila, Cahuc, Dolado and Le Barbanchon find that the unemployment gap between France and Spain would have been reduced by 45% had Spain adopted French labor market institutions. And I surmise it would be much more with other laws, as France has quite high employment protection in international comparison. No wonder that Spain recently scrapped much of its employment protection regulation in the midst of a deep recession, which may sound counter-intuitive at first. But if you want firms to hire in a recession, they should not have to commit for long-term employment.