Extremely Preliminary
Version 1.1
October 27, 2001
IT TAKES THREE TO TANGO:
COURTS, UNIONS AND THE POLITICS OF LABOR
LAW CONSTITUTIONAL INTERPRETATION
ARGENTINA 1935-1998
by
Matias Iaryczower, Pablo T. Spiller and Mariano Tommasi*
*
Department of Economics, UCLA; Haas School of Business, University of California,
Berkeley; and Department of Economics, Universidad San Andrés and CEDI. The authors can
be reached at miaryc@ucla.edu, spiller@haas.berkeley.edu, and tommasi@udesa.edu.ar. This
paper was prepared for the Washington University Conference on Constitutional Politics, St.
Louis, MO, November 2-3, 2001.
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It Takes Three to Tango: Court, Unions and the Politics of Labor Law
1. Introduction
Strikes and public demonstrations are visible instruments unions use in improving their
bargaining position vis-à-vis employers. But the use of these instruments is not limited to
the industrial relations area. Unions can, and in most countries do, use them to influence
political decision making. The direct influence of unions' actions on government
decisions seems obvious.1 What is not so obvious is the influence union action may have
on the interplay between the Court and the polity. In this paper we explore such
influence. We present a model of interaction among the polity, unions and the Courts,
which provide conditions for union actions to increase the independence of the Court
from the executive. In particular, when Courts oppose President’s anti-labor policies,
union actions provide a leverage the court may use in voting against the President's
desired policy. Our model shows that to understand the behavior of unions, the Courts
and the President, we must take into account the optimal strategies of all the players.
Our model is related to the literature on the influence of public opinion on judicial
behavior,2 with one major difference. While public opinion was seen in that literature as
essentially passive, here unions behave strategically vis-à-vis the Court and the President.
Their fights against the President take into account the potential behavior of the Court,
and the Court learns from that behavior.
We test our model analyzing, for the period 1935-1998, the joint determination of
Argentina's Supreme Court constitutional decisions on labor issues,3 the President's
tendency to legislate on labor issues, and the unions' tendency to strike. Our results
provide support to the strategic model of labor law constitutional interpretation. Our
empirical results show that, ceteris paribus, the introduction of new labor laws is lower
the higher the probability of a pro-constitutional judicial interpretation, and the higher the
probability of union strikes. At the same time, the higher the probability of a pro-
1
Cite work on public opinion, etc.
See, for example, Caldeira and Gibson (1992), others.
3
For a general analysis of the Argentine Court's decision making, see Iaryczower, Spiller,
Tommasi (2001) - hereafter IST (2001).
2
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It Takes Three to Tango: Court, Unions and the Politics of Labor Law
constitutional judicial interpretation, the lower the tendency of unions to strike. Finally,
the probability of a pro-constitutional judicial interpretation falls with the strength of the
unions. Thus, we find that in this triangular relationship, Presidents use sympathetic
Courts in their fights against the unions; unions use sympathetic Courts in their fights
against the President, and the Court relies on union strength to increase its independence
from the President.
Our model explores the interrelations among the three players in an environment of
imperfect information, where the Court is uninformed about the strengths of the President
and the unions. We study three basic cases: Street Conflict (SC) in which the Court and
the President both have an anti-labor stance; Institutional Conflict (IC) in which only the
Court has an anti-labor stance;4 and Total Conflict (TC) in which the President favors an
anti-labor policy, while the Supreme Court does not. As in IST(2001), the Court’s vote
against the President decreases with the President's political support in Congress.
Nevertheless, there are environments in which an otherwise lenient court stands against
the President. Furthermore, there is an “informative” equilibrium, in which unions only
fight a relatively weak President, and the Court goes against the President only after
observing that the union fights the President.
2. The model
The basic structure of the model is as follows: We assume that the President can
costlessly introduce a new piece of legislation.5 Specifically, her options at this point are:
a pro-labor norm (relative to the status quo), the status quo itself, and an anti-labor norm
(again, relative to the status quo).6 The union can react fighting this legislation or
acquiescing. If the President wins this challenge, which happens with probability pF, the
norm remains alive. It she loses, the outcome is the status quo. Before the fight between
The IC case corresponds to the game analized and tested in IST (2001).
We are using the term “President” to indicate the governing coaltion, including both the
President and the Party’s coalition in Congress.
6 Since the worst outcome for the President in this game is assumed to be the return to the status
quo (with potentially positive costs of fighting for the innovation), and the President’s
preferences for or against labor are common knowledge, the initial choice will be between either
a pro-labor innovation and inaction, or between an anti-labor innovation and inaction.
4
5
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It Takes Three to Tango: Court, Unions and the Politics of Labor Law
the President and the union is resolved, the Court must decide whether it challenges the
norm on constitutional grounds or upholds it As in ITS (2001), the President can initiate
an impeachment procedure against those Justices who defy her. Would she initiate
impeachment proceedings, she will accomplish this with some probability pI. If the
impeachment proceedings succeed, the constitutionality of the norm is restored.
The preferences of the President, the unions and the Court are represented by:
VP(;P)=UP(N();P) – KI () - KF(),
VU() = UU(N()) – KU(), and
VJ(;J) = UJ(N();J) – KJ(),
where  is the strategy profile, N  {NPL, SQ, NAL} is the norm that prevails at the end of
the game, Ki() represent the fixed costs of particular strategies (KI (), KF() are the
President's fixed costs of attempting to impeach a Justice and of fighting the union, KU()
is the union's fixed cost of fighting the President, and KJ() represents the court's
disutility of being effectively impeached by the President). The President's pro- or antilabor stance is represented by P  {PL,AL}. Obviously U=PL, while J  {PL,AL}
represents the Court's pro- or anti-labor stance.
As a matter of convention, we will refer to three basic cases depending on the players'
preferences:
J = P  U as Street Conflict (SC);
J  P = U as Institutional Conflict (IC), and
P  J = U as Total Conflict (TC).
Our interest lies on how unions affect the Court's ability to make decisions free of the
threat of presidential retaliation. Thus, the most relevant case is TC. Nevertheless, we
solve SC and IC as benchmarks.7
7
The less interesting, No Conflict, case is when J = P = U, which deserves little attention.
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It Takes Three to Tango: Court, Unions and the Politics of Labor Law
We specify now the game's information structure. Information is assumed to come from
two independent sources. A publicly observed signal, M, represents the nominal majority
of the President in Congress. The probability of impeachment, pI(M), is non decreasing
in M. pI(M) is realized at the beginning of the game, and is hence common knowledge.
The probability that the President can successfully resist a challenge by the unions, pF, is
unobserved by the Court. We assume pF depends on the realization of a random variable
  {L, H}, which is observed by both the President and the unions, but is unobservable
to the Courts.8 The values that  takes represents whether the president is "tough" or
"weak," thus, pFH = pF (H) > pFL = pF (L).9
The extensive form of the game with this informational structure is represented in Figure
1 below. The game begins with Nature choosing M and . The President, whether
Tough ( = H) or Weak ( = L), then chooses to introduce or not the norm. If she does
not, the game ends, and the Status Quo prevail. If she does, the unions (for each value of
), must decide whether to fight or not.10 The Court’s strategy must then specify whether
to challenge the norm or not in both the event that the unions fight or do not. While the
Court does not observe , it has prior beliefs 0. Following the Court’s decision, the
President has to decide whether to attempt to impeach the Justices or not. Outcomes
follow. Note that since we are assuming that a defeat of the President whether by the
Courts or by the streets can reverse her decision, in the event that the union fights there
are four possible events, only one of which – successful impeachment and successful
fight - will see the President triumphant.
8
This informational asymmetry can have multiple sources, one of which can be the degree of
party discipline in both political parties and the unions.
9 A more general formulation would have assumed that p = p ( ,).
I
I
M
10
As a matter of convention, we will refer to a union being “High” when =H, while a union is
"Low" when =L.
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It Takes Three to Tango: Court, Unions and the Politics of Labor Law
Figure 1
N
ThetaH
ThetaL
<Mu0>
<(1-Mu0)>
PH
Innov
PL
No Innov
No Innov
Innov
UH
UL
No Fight
No Fight
<Mu1>
Fight
JNF
<(1-Mu1)>
Const
Const
Unc
PH
PL
Imp
Imp
NI
NI
N
Can Impeach J
Fight
Unc
N
Can't Impeach J
Can't Impeach J
<Mu2>
Can Impeach J
<(1-Mu2)>
JF
U Wins
Const
Const
Unc
N
N
PH
PL
P Wins
P Wins
Imp & Fight
Imp & Fight
NI
NI
N
Presi Wins U
Can Impeach J
U Wins
Unc
N
Presi Looses U
Can't Impeach J
Presi Wins U Presi Looses U
Can't Impeach J Can Impeach J
Presi Wins U
Can Impeach J
Presi Looses U
Can't Impeach J
Presi Wins U Presi Looses U
Can't Impeach J Can Impeach J
Formally, let “I” denote a successful impeachment attempt, “~I” an unsuccessful
impeachment attempt, “F” a "street" victory for the President against the unions, and
“~F” a defeat of the President at the hands of the unions. Then the set of possible states of
nature for the informed players (President and unions) is Inf = {(I,F), (I, ~F),( ~I, F),( ~I,
~F)}, and that of the uninformed player (the Court) is Uninf = {(I,F, H), (I, ~F, H),( ~I,
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It Takes Three to Tango: Court, Unions and the Politics of Labor Law
F, H), ( ~I, ~F, H), (I,F, L), (I, ~F, L),( ~I, F, L), (~I, ~F, L)}. The Court has a
probability distribution over   Inf, p(;M) = p(/;M).q(). We will denote the
Court’s prior over  as 0 = q(H) and (1-0)= q(L). After observing the play, but not yet
the outcome, by the union and the President, the Court will update its prior. We solve for
the sequential equilibria of the game. In a sequential equilibrium the following
conditions hold:
(a) behavioral strategies satisfy sequential rationality,
(b) Bayes’ rules is used when possible to update beliefs – in information sets reached
with positive probability in equilibrium -, and
(c) for information sets that are not reached with positive probability in equilibrium,
beliefs are the limit of the beliefs – computed using Bayes’ rule – in a sequence of
assessments [t,t] of totally mixed strategies converging to the equilibrium.
Using Bayes’ rule, q(/)=Pr(/).q() /  Pr(/).q(). Since we are not allowing
correlated strategies, we have that 1 = q(H/Fight by the unions is observed) and 2 =
q(H/Fight by the unions is NOT observed) satisfy
1 = 0.DPH.FUH. [0.DPH.FUH+(1-0).DPL.FUL]-1
and
2 = 0.DPH.(1-FUH). [0.DPH.(1-FUH)+(1-0). DPL.(1-FUL)]-1 .
Here DPH denotes the probability that the equilibrium strategy of the “Tough” President
assigns to “innovate”, DPL denotes the probability that the equilibrium strategy of the
“Weak” President assigns to “innovate”, FUH denotes the probability that the
equilibrium strategy of the union that observes a “Tough” President assigns to “fight”,
and FUL denotes the probability that the equilibrium strategy of the union that observes
a “Weak” President assigns to “fight”. We will also let CJF and CJF denote the
probabilities that the strategy of the SC attach to voting Constitutional after observing
Fight and Not Fight by the unions.
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It Takes Three to Tango: Court, Unions and the Politics of Labor Law
At the expense of tiring the reader with notation,11 we introduce some, we think, useful
definitions. Define the union’s “relative” cost of fighting the President as
HU  KU.[UU(SQ)- UU(NAL)] -1;
the ratio of the fixed cost KU and the difference in payoffs of keeping the Status Quo and
having the anti-labor norm NAL. Similarly, the President’s “relative” cost of fighting the
union is defined as
F  KF.[UP(NAL)- UP(SQ)] -1.
The President's "relative" cost of attempting to impeach the Court when she favors an
anti-labor policy but the Court favors a pro-labor policy is
I  KI.[UP(NAL)- UP(SQ)] -1
while her "relative cost" of impeachment when she favors a pro-labor policy but the
Court favors an anti-labor policy is given by
I‘ KI.[UP(NPL)- UP(SQ)] -1
Finally, denote SC’s relative cost of being impeached when the President favors an antilabor policy but the Court favors a pro-labor policy as
HJ  KJ.[UJ(SQ)- UJ(NAL)] -1,
and
HJ‘ KJ.[UJ(SQ)- UJ(NPL)] -1
will denote SC’s relative cost of being impeached when the President favors a pro-labor
policy but the Court favors an anti-labor policy.
We now start solving the benchmark cases. The No Conflict case is straightforward, and
its results are given in the next proposition.12
Proposition 1. In the No Conflict case, the President enacts a pro-labor legislation,
which is not challenged by the Court, or fought by the unions; there is no impeachment.
11
12
We promise better notation for the next draft.
Proofs will be provided in the appendix in the next draft.
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It Takes Three to Tango: Court, Unions and the Politics of Labor Law
The following proposition completely characterizes the set of equilibria in the Street
Conflict (SC) case:
Proposition 2. In the Street Conflict case,13 the Supreme Court does not challenge the
President, who never impeaches. Fight by the unions is “non-increasing” in HU, and
innovations by the President are non-increasing in F. Specifically,
(a) if HU < 1 - pFH,14 the union fights both a weak and a tough President. In this case, for
F < pFL, the President innovates independently of ; only the tough President
innovates if pFL < F < pFH, and the President does not attempt to legislate
independently of her type if pFH < F;
(b) if 1 - pFH < HU < 1 - pFL,15 the union only fights a weak President. Here a tough
President always innovates, and a weak President only does so if F < pFL. Finally,
(c) if 1 - pFL < HU, the union never fights. In this case, the President legislates
independently of the realization of .
Corollary: The equilibrium is completely independent of the President’s majority in
Congress M.
We now introduce more definitions:
Definition 1: We say that there is a Unified Government (UG) whenever I < pI.
Hence, given a majority level M, we say that there is a UG if M > M*, where M*
satisfies I = pI (M*). A government that is not Unified is Divided.
The next proposition completely characterizes the set of equilibria in the Institutional
Conflict (IC) case.
13
Recall that "Street Conflict" takes place when the preferences of the president and the court are
aligned.
14
That is, the probability of a Tough President losing the "street" fight to the unions is high.
15
In this case, the probability of a Tough President losing the "street" fight is relatively low, but
a Weak President losing the fight is relatively high.
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It Takes Three to Tango: Court, Unions and the Politics of Labor Law
Proposition 3. In the Institutional Conflict (IC) case,
(a) A constitutional determination by the Supreme Court, CJ, is, on the equilibrium path,
non-decreasing in M.
(b) Unless there is a Unified Government, the President never impeaches. Hence, SC
always challenges an eventual (pro-labor) norm, which is in fact never enacted
(indifferent).
(c) Under a Unified Government, the SC only acquiesces if pI.(1+HJ’) >1. The President
always innovates in this latter case, and impeaches when SC challenges only if HJ‘<
pI.
Corollary: The equilibrium play is independent from HU, F and pF.
Following our inability to simplify matters, we now introduce even more terminology:
Definition 2. We say that there is a Combative Unified Government (CUG) whenever
(I+F)/pF< pI . Hence, given a majority level M, we say that there is a CUG if M >
M*, where M* satisfies (I +F)/ pF = pI (M*).
We now start analyzing the Total Conflict case. We first look at the simplest case in
which there is no asymmetric information. The following proposition describes the most
salient facts about the equilibrium in this case.
Proposition 4. Equilibrium behavior in the Total Conflict with Symmetric
Information (TCSI) case displays the following properties:
(a) The President only innovates in CUGs.
(b) All else equal, Supreme Court's constitutional challenges are non-increasing M and
the unions' fighting the President is non-increasing in HU.
(c) Free Riding by Courts. Let M* denote the value M such that M > M* CJF = 1,
and M** denote the value M such that M > M** CJNF =1. Then M*<M**.
(d) Free Riding by unions. Let HU* denote the value of HU such that HU < HU*,CJF =
CJNF =0  FU =1, and HU** denote the value of HU such that HU < HU**,CJF =
CJNF =1  FU =1. Then HU* < HU**. When CJF = 0 and CJNF =1, FUH =FUL =0.
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It Takes Three to Tango: Court, Unions and the Politics of Labor Law
Point (c) indicates that in TC with symmetric information, the smallest President’s
majority in Congress required to get the Court to acquiesce is actually higher when the
union doesn’t fight that when it does. In this range the Court is leaving the burden of the
fight to the union, avoiding any risks. Similarly, point (d) indicates that in the TC with
symmetric information, the highest relative cost of fighting for the union that gets the
union to fight is actually lower when the union anticipates that the Court will challenge
the President independently of its action, than when it anticipates that it will acquiesce
independently of its action. In this range, the union is the one avoiding taking any risks,
leaving the burden of the fight to the Court. Moreover, by (c) there is an interval
[M*,M**] of the President’s party majority in Congress in which the Court would not
challenge if the union strikes but challenges if the union does not fight. The union’s
response in this interval is to avoid fighting, leaving the risks to the Court.
Now we are prepared to tackle the Total Conflict with Asymmetric Information
(TCAI) case. Our first proposition for this case states that a Unified Government is not a
sufficient condition for the President to go against the unions.
Proposition 5. In the Total Conflict with Asymmetric Information, if the Government
is not a CUG, then the President does not innovate.
Given the extent of free riding in TCSI, the next proposition explores free riding in
TCAI.
Proposition 6. In the Total Conflict with Asymmetric Information
(a) If pI < pF or pI.(1+HJ’)>1 there is no equilibrium in which CJF =1 and CJNF =0 .
(b) When neither of these conditions hold, for an equilibrium with CJF =1 and CJNF =0
to exist it is necessary that HU be sufficiently small, and that at least the Tough
President Government is Combative Unified.
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It Takes Three to Tango: Court, Unions and the Politics of Labor Law
This proposition shows the power of informational asymmetries. While under symmetric
information both the union and the court could free ride on each other (the court upholds
the President when there is a high probability of the union winning the street fight, and
the union not fighting when there is a high probability of the Court going against the
President), such results do not hold under informational asymmetries.
Indeed, Proposition 6 says that under reasonable conditions, there are no equilibria in
which the Court decides to uphold the President if unions fight, while it decides to go
against the President if unions do not fight. Since pF refers to the probability that a
President can maintain a given piece of legislation against a fight by the union, while pI
refers to the probability that she can successfully impeach a Supreme Court Justice, the
requirement that pI < pF does not seem too stringent. We will henceforth maintain this
as an assumption. Nevertheless, it should be noted that if this condition does not hold, we
might have an equilibrium in which Court free rides on the union when at least the Tough
President’s Government is Combative Unified. In this case, opposing the Government is
too risky for Justices, and the opportunity cost of not doing so is reduced by the relatively
high expectation that unions could win their fight against the President “in the Streets”.
The relatively small HU is needed to assure that unions will go against the President even
if they know they will be fighting alone.
The next Proposition shows that – as in the previous cases - Court independence is
reduced when they face a more unified Government if they care enough about being
impeached, and this is sufficiently “cheap” – or the issue considered sufficiently
important – for the President. Furthermore, if even the weak President’s Government is
Combative Unified, we find that the Court’s behavior is independent of union’s behavior.
Before presenting these results we need one more definition:
Definition 3. We say there is impeachment uncertainty when the weak President’s
Government is Non Combative Unified, and the tough President’s Government is
Combative Unified.
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It Takes Three to Tango: Court, Unions and the Politics of Labor Law
Proposition 7. In the Total Conflict with Asymmetric Information Case:
(a) On the equilibrium path, CJ is non-decreasing in M.
(b) If HJ’<(1-pI)/pI or no President has a Combative Unified Government, then CJ=0
on the equilibrium path.
(c) If HJ’>(1-pI)/pI, and there is impeachment uncertainty, then CJNF =1.
(d) If both the weak and tough Presidents have Combative Unified Governments, then
CJNF =CJF =1.
Proposition 7 shows that in the Total Conflict case, the Court will follow very strong
Presidents, independently of what the unions do. However, if there is uncertainty about
impeachment and the cost of impeachment is high, then if unions do not fight, the Court
will uphold the President. On the other hand, if the President's probability of being very
strong is low, then the Court will vote against the President, independently of unions'
actions.
We next turn to the question of whether there exist an equilibrium in which even if
neither the Court nor the union would challenge the President in the IC or SC cases
respectively, they would “cooperate” to jointly defy her in the TCAI case. The next
proposition establishes the conditions for what we call a “Coordination Inducing
Separating Equilibrium” to exist.
Proposition 8. In the Total Conflict with Asymmetric Information Case, assume
pI.(1+HJ’)>1 and HU>1-pFL (the Court doesn’t challenge the President in the IC case, and
the union doesn’t challenge the President in the SC case).
(a) If 0 > pFL.[pI.(HJ+pFH)-( pFH-pFL)]-1, and there is impeachment uncertainty, there
exists an equilibrium in which FUH<1, FUL=1 and CJNF=1, CJF<1.
(b) Furthermore, if HU>1- pI.pFH, this equilibrium has FUH=0, FUL=1, CJNF=1 and
CJF=0.
Thus, under the conditions of Proposition 8, there is an equilibrium in which the unions
fight a Weak President with a higher probability than a Tough President, and the Court
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It Takes Three to Tango: Court, Unions and the Politics of Labor Law
challenges the President with a higher probability when it sees a fight by the union that
when it does not. Moreover, if the additional condition that union's relative fight cost are
high (HU>1- pI.pFH) holds, this equilibrium is in pure strategies. The union only fights a
Weak President providing the Court with a perfect signal of Presidential strength. Thus,
the Court only challenges the President when it sees a fight, that is, the Court only
challenges a Weak President.
Note that the existence of the coordinating inducing separating equilibrium depends upon
the fact that there is impeachment uncertainty, so a higher difference between pFH and
pFL, and a high relative cost of signaling for the union would contribute to this result,
while rather extreme (either high or low) values of M would not.
The next result is closely related to the previous proposition.
Corollary. In the Total Conflict with Asymmetric Information Case, if pI.(1+HJ’)>1,
0 > pFL.[pI.(HJ+pFH)-( pFH-pFL)]-1,and there is impeachment uncertainty, then CJNF=1,
and CJF is decreasing FUH.
Finally, we note that in TCAI:
Corollary. The union’s equilibrium strategy is dependent upon the Court's equilibrium
strategy CJ.
To summarize, our model provides conditions under which there is a subtle coordination
of actions among the unions and the Court. Unions fight the President, and this fight
provides an impetus for the Court to block the President's legislative proposal.
Furthermore, in this case, weaker Presidents may decide not to innovate. Thus, a major
empirical implication of our model is that the behavior of unions, the Courts and the
President must take into account the optimal strategies of all the players.
14
It Takes Three to Tango: Court, Unions and the Politics of Labor Law
3. Some Preliminary Evidence.
A. Data Description
A.1. Supreme Court Cases
In this paper we use labor and social security cases that reached the Supreme Court on
Constitutional grounds and were decided from 1935 to 1998. Argentina's Supreme Court
decides several thousands of cases a year.16,17 Besides the fact that many of these cases
are the exact repetition of one another, although with different plaintiffs, their political
significance is extremely diverse. Thus, the first issue to address is the scope of the
sample. As in IST (2001), we limit the pool of cases, considering only the cases
published in extenso in La Ley, the main judicial publication in Argentina. Following
Molinelli (1999), to distinguish between important and unimportant cases, our data-set
includes only those cases which fulfill three conditions: (1) the case involves the
constitutionality of government norms,18 (2) the Court actually decided for or against the
constitutionality of the challenged norm,19 and (3) the case was published in extenso in
"La Ley".20
16
Those of you familiar with IST (2001) may skip the description of the nature of the Supreme
Court data.
17 Since 1991, the Court has been handling between 5000 and 8000 annually. See Molinelli
(1999). Differing from its U.S. counterpart, the Argentine Supreme Court does not have the
ability to issue certiorari decisions, nor does the stare decisis doctrine formally exist. As a
consequence, the Argentine Supreme Court sees a very large number of cases per year (Bidart
Campos 1982). But the thousands of cases mask the fact that many are repetitive cases. Since
until very recently the court did not have the ability to determine a law as unconstitutional per se,
but rather had to deal with the unconstitutionality of its application to a particular case (person),
the Court has ruled multiple cases but essentially implemented a single decision multiple times.
18 By norms, we mean laws, Presidential decrees, administrative decisions and resolutions. Cases
in which the constitutionality of a lower court decision was questioned (arbitrariedad) and cases
in which the constitutionality of the interpretation of a norm by a lower court was questioned but
not the norm in itself , were excluded.
19 Cases in which the Supreme Court decided not to pronounce over the constitutionality of the
challenged norm, alleging formal or technical reasons, were also excluded. This is in fact a very
disparate category, including multiple types of issues, like lack of foundation, improper
presentation, “political question”, and so on and so forth. See Molinelli (1999). For this
condition to substantially bias the sample, it has to be the case that the Court facing a
government decisions it dislikes, but one which it cannot oppose because of the fear of reprisals,
chooses to decline to review it based on "technical" reasons. To explore this potential bias we
divided the sample in democratic and dictatorship periods. We find that the probability of the
Court rejecting to consider a case for technical reasons is the same (around 22%) in both
15
It Takes Three to Tango: Court, Unions and the Politics of Labor Law
A.2. The Political Environment
The theory presented above suggests that Justices’ votes adjust partially to reflect the
President's ideal policy whenever she has the political strength to retaliate. Given an
institutional structure like that of Argentina, this will, in turn, depend on the President's
degree of control over Congress. The two "dangers" faced by Justices in Argentina over
the period of analysis, apart from constitutional reform, were Court enlargement, which
until the reform of 1994 could be achieved with a simple law, and impeachment, which
requires a supermajority in both Chambers.
To capture Presidential control over congress, we create a set of categorical variables that
allow us to distinguish the various political scenarios. Democratic governments are
classified at the time of each Supreme Court‘s decision as “Unified” or “Divided”,
generating two variables for democratic periods, UNIFGOV and DIVGOV. By "unified
government" we understand the situation in which the presidential party has an absolute
(more than 50%) or relative (plurality) majority in both chambers of Congress.
Governments that are not “unified” are "divided.”
To reflect the difference between the court enlargement potential and the (tougher)
impeachment, we distinguished two cases within the unified government case.
UNIFGOV-SIMPLE indicates that while the government can be classified as a unified
government, the President does not have the majority required to impeach Supreme Court
Justices. On the other hand, UNIFGOV-SUPER indicates that the President not only
democratic and dictatorship periods. Thus, we do not believe that this sample selection biases
our results.
20 While these criteria may lose some relevant information, since we are focusing on the
interaction of the Court with Federal political institutions, this risk is relatively small. The loss of
information is mainly bounded to appear in cases that consider provincial norms and low level
administrative resolutions - instead of laws or Presidential decrees, both instances where the
potential for political conflict is reduced. Additionally, there could be some loss of data in cases
where the Court decided the constitutionality of the challenged norm, but for political reasons
they were considered "less relevant" by La Ley. Such could be the case with highly politically
charged cases during military regimes – although the data set includes several highly charged
cases, like that of Jacobo Timmerman, a famous jewish journalist and newspaper owner jailed
for opposing the military regime. Helmke (1999 - Table 2) finds that on average, cases that are
reported at length in La Ley, tend to reverse the government more often than those which are not
reported at length.
16
It Takes Three to Tango: Court, Unions and the Politics of Labor Law
controls a unified government, but also has the supermajority required to successfully
impeach Supreme Court Justices. The complement to these three scenarios (DIVGOV,
UNIFGOV-SIMPLE and UNIFGOV-SUPER) is DICTATORSHIP, which takes the
value 1 whenever the Presidency is occupied by a dictator and 0 when the President is
democratic.
A.3. Judicial Preferences21
An important part of the empirical exercise is to account for Justices’ preferences over
policies, and through it, to measure the importance of appointing "friendly" Justices.
"Measuring" preferences is obviously not an easy task. A first approximation would be to
create an absolute index over time reflecting more or less pro-labor positions of Judges
and Congress derived from voting behavior.22 Nevertheless, the absence of strong
national political parties with fairly stable positions in the policy spectrum, and the
scarcity of roll-call data, makes this a very difficult task in Argentina.23 Here, instead, we
compute the extent of political alignment between the Justice and the sitting President by
examining the appointment process. The basic idea is to look at whether the justice was
appointed by the sitting president, a past president with a similar stance in labor
legislation, or a past president with a different stance in labor legislation, combining this
with the appointing president’s control over the senate.
To explain the way we compute our political opposition variable (POLOPOS), assume
initially that Congress does not participate in appointing the Justices. That is, the
President can appoint whomever she wants. In this case, the President would appoint a
justice with preferences identical to her own. During this President's tenure, the justice
has a 100% political alignment. Thus, our political opposition variable, POLOPOS, will
take a value of 0 for that particular Justice, reflecting that the President and the Justice
have the same political tendency. Assume now that a new President is elected, and that
the Justice is still at the Court. Since we are assuming that the Justice is a perfect clone of
the nominating president, the value of POLOPOS assigned to the Justice will depend on
21
22
The discussion of justices' preferences, follows IST (2001).
See Bergara, Richman and Spiller (1999) and Segal (1997).
17
It Takes Three to Tango: Court, Unions and the Politics of Labor Law
the comparison of the two presidents’ political tendencies. If the new president has the
“same political tendency” of the former president, the value of POLOPOS will still be 0.
If the new president has an “opposing political tendency”, POLOPOS will take the value
1.24
Prior to its reform in 1994, the Argentinean Constitution established that Supreme Court
candidates must be nominated by the President and approved by the Senate by a simple
majority. Since 1994, a two-thirds majority in the Senate is required. To get a more
accurate description of the Argentinean appointment process, we modify the POLOPOS
variable as follows: Whenever the President has the required majority in the Senate, we
assume that the President can appoint her most preferred judicial type.25 However, when
the President doesn’t have the required majority in the Senate, the equilibrium
nomination will reflect a bargaining between the President and the opposition in the
upper house.
We assume this bargaining game to take the following form. We give the value of 0 to
the position of a President with respect to labor policy. An opposed Senate, then, has a
value of 1 in the policy opposition spectrum.26 Whenever a vacancy appears, the
President has to produce a nomination. If the Senate does not accept this particular
candidate, the position remains vacant. In this case, the position of the median voter of
the incomplete Court (call this MVI) becomes the status quo, and the payoff that this
situation provides to the players becomes their outside value in the bargaining game. The
See Spiller and Tommasi (2000).
This method allows us to classify Justices’ and Presidents’ preferences along the complete
sample (1935-1998) without having to use a common measure for Presidents "located" far in
time and political environments. This would be a daunting task given the absence of strong
national political parties with fairly stable positions in the policy spectrum. Instead, we only need
to compare presidents who “share” Justices, which given the volatility in the Court, substantially
simplifies the task. A similar method is what gives continuity to the “nominate” approach. See
Poole and Rosenthal (1991).
25 We assume that loyal legislators will accept the President’s nomination without imposing a
cost.
26 Since the President lacks a sufficient majority, the President must bargain with the opposition.
As mentioned before, given the scarcity of roll calls, it is almost impossible to quantify the
"degree" of political opposition of the opposition. Thus, we give it a value of 1 to its political
opposition.
23
24
18
It Takes Three to Tango: Court, Unions and the Politics of Labor Law
President would like, as in the previous exercise, to nominate a “clone”, but anticipates
that this would not be accepted by an opposing Senate, as it would not accept a Justice of
a type located further away from its policy ideal than the MVI. Since the President, in
turn, will not nominate a justice of a type that is more distant than the MVI, in this simple
game an equilibrium appointment is a person of type identical to the MVI. 27 The median
across current justices of the POLOPOS variable computed in this way is called
MEDIAN.
A.4 Unions
In the Total Conflict with Asymmetric Case of the previous section the Court’s vote
depends on the fighting decision by the union. To measure the model’s “Fight”, FU, we
use the number of strikes per year, STRIKES, for which we gathered strikes data from
1935 from various sources (Figure 2). 28 Figure 2 shows a drastic increase in the number
of strikes following the military coup that deposed President Juan D. Perón, and the
creation of the Peronist Movement. As we showed in IST (2001), the first
administration of President Perón marked a defining moment in the relation of the polity
to the judiciary. Figure 2 also shows, what many have already mentioned,29 that it also
marked a defining moment in the organization of the labor movement, and in the extent
of use of strikes.
Our method may be inaccurate when multiple appointments are considered at the same time.
In this case appointments away from the MVI are feasible, as long as they are balanced (i.e. one
to each side of the MVI). Snyder and Weingast (1999) develop a slightly similar model of
appointment for NLRB commissioners.
28 It should be noted that the accuracy and reliability of strike data Argentina is at best
questionable. Although the importance of unions in Argentina’s political life generated a vast
literature, in few cases authors provide data at all, and where these are provided, they are often
contradictory. Since every study focuses on a relatively short period of time, we were unable to
find a single source covering the entire period of our sample (1935 – 1998). With these
constraints, and showing amazing courage for which we may one day pay dearly, we built the
variable STRIKES following the following steps. First, we selected what we thought was the
best possible source for each subperiod of our sample. Second, to reduce possible differences in
absolute values coming from different methodologies, we fixed the absolute values of what we
considered was the best source available, and generated the remaining data using the percent
variation in the next best available series. The most comprehensive and reliable source is
O’Donnel (19..) which covers the period 1955-1972. For 1935 – 1955 we used the variations in
data from Rotondaro (19..), which independently covers the period 1935 – 1968. For the period
1972 – 1998 we used Torre (19..) , Fernandez (19..) and Nueva Mayoria (19..).
27
19
Figure 2
Number of Strikes in Argentina, 1934 - 1998
It Takes Three to Tango: Court, Unions and the Politics of Labor Law
800
700
600
500
400
300
200
100
0
34 36 38 40 42 44 46 48 50 52 54 56 58 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98
Since our model derives a different impact of STRIKES upon Court’s behavior according
to the political strength of the President, we also introduce the interactions of STRIKES
with the political environment, STKDIC, STKUSUPER, STKUSIMPLE and STKDIV.
Assuming that labor legislation maps into a state – including wages and unemployment –
which determines workers well being, we expect FU to be a function of wages and
unemployment. Assuming concavity of the union’s utility function, a given change in
policy would produce a bigger change in utility when wages are low, and unemployment
is high. Hence, the relative cost of fighting for the union, HU, would be smaller when
wages are low and unemployment is high. According to the model in section 1, we
would then expect FU to be decreasing in wages, and increasing in unemployment. We
then introduce WAGES, which measures the detrended real wage, and OUTPUT, the
detrended GDP.
A.5 The President
According to our model, the President will only introduce her desired legislation if her
majority in Congress is sufficiently high. This creates a natural sample selection problem,
as laws do not appear randomly. Correcting for this potential problem is no easy task, as
29
References…
20
It Takes Three to Tango: Court, Unions and the Politics of Labor Law
we would need to have information about the laws that the President would have liked to
introduce, but did not. We approximate this variable by considering the number of labor
laws enacted by each President, QLABLAWS, assuming that there is some connection
between the number of laws enacted and the number of policy issues addressed (See
Figure 3). Figure 3 also shows that labor issues started to become contentious during the
first administration of President Perón and worsened thereafter.
Figure 3
National Labor Laws - Argentina, 1900 - 2000
25
20
15
10
5
0
1900
1904 1908
1912 1916
1920 1924
1928 1932
1936 1940
1944 1948
Table 1 provides a summary of the data.
21
1952 1956
1960 1964
1968 1972
1976 1980
1984 1988
1992 1996
2000
It Takes Three to Tango: Court, Unions and the Politics of Labor Law
Table 1
Sample Information
Variable
Obs
Mean
Std.Dev. Min
Max
QLABLAWS
314
9.105
6.530
0
25
DICTATOR
314
0.433
0.496
0
1
U.SUPER
314
0.105
0.307
0
1
U.SIMPLE
314
0.322
0.468
0
1
DIVIDED
314
0.140
0.348
0
1
CONST
314
0.637
0.482
0
1
WAGE
314
0.043
0.123
-0.302
0.328
OUTPUT
314
0.040
0.112
-0.207
0.209
POSTPER
314
0.793
0.406
0
1
MEDIAN
314
0.172
0.316
0
1
PREFCOURT
314
0.446
0.453
0
1
STRIKES
314
177.643
152.697
7
755
STKDIC
314
60.446
92.576
0
368
STKUSUPER
314
3.866
17.415
0
206
STKUSIMP
314
73.041
132.564
0
688
STKDIV
314
40.290
133.666
0
755
AGCONST
194
0.572
0.496
0
1
AGFORMAL
194
0.119
0.324
0
1
Conditional on Data for AGCONST and AGFORM
QLABLAWS
194
9.577
6.878
0
25
DICTATOR
194
0.521
0.501
0
1
U.SUPER
194
0.124
0.330
0
1
U.SIMPLE
194
0.278
0.449
0
1
DIVIDED
194
0.077
0.268
0
1
CONST
194
0.675
0.469
0
1
WAGE
194
0.037
0.127
-0.216
0.328
OUTPUT
194
0.054
0.112
-0.152
0.209
POSTPER
194
0.732
0.444
0
1
MEDIAN
194
0.147
0.316
0
1
PREFCOURT
194
0.363
0.455
0
1
STRIKES
194
136.026
105.954
7
368
STKDIC
194
72.423
97.426
0
368
STKUSUPER
194
4.861
21.043
0
206
STKUSIMP
194
56.577
106.338
0
331
STKDIV
194
2.165
8.031
0
54
22
It Takes Three to Tango: Court, Unions and the Politics of Labor Law
B. Econometrics
We specify the econometric model as follows. Consider first the behavior of SC Justices.
Assume the net utility the SC can derive from voting “Constitutional” a particular piece
of legislation can be written as UJ(cj, -J, x) = ZC.C + C, where ZC is a vector
containing characteristics both of the case and the SC. In particular, ZC includes the
decision of the President DP and the reaction of the unions FU. Then we can write CJ =
1 if UJ > 0 and CJ = 0 if UJ < 0, so Prob(cj =1 /ZC)= E(cj /ZC)= Prob(C < ZC.C)=
F(ZC.C), where F is the distribution of C. Considering in turn the behavior of the unions
and the President, we have FU = ZU.U + U, and DP = ZP.P + P, where ZU includes the
behavior of Court, CJ, and of the President, DP, while ZP includes CJ and FU.
Assuming that the distribution of C is uniform, we have a system of three linear
equations in the three endogenous variables QLABLAWS, STRIKES, and CONST,
which we estimate using 3SLS. We impose some identification restrictions which arise
naturally from each players' incentives. See Table 2 where we present the results of the
3SLS.
Table 2
Three Stage Least Squares Regression
QLABLAWS
DICTATOR
U.SUPER
U.SIMPLE
DIVIDED
STRIKES
CONST
STRIKES
WAGE
OUTPUT
CONST
I
30.43
(2.90)
26.97
(3.66)
25.21
(3.56)
22.65
(3.42)
-0.02
(0.003)
-23.35
(4.63)
I
-179.84
(98.89)
-233.60
(160.52)
-647.38
II
III
IV
24.78
(2.28)
18.66
(3.07)
19.42
(2.83)
14.72
(2.72)
-0.01
(0.003)
-15.24
(3.51)
12.89
(1.09)
7.16
(1.39)
4.37
(1.45)
1.93
(1.60)
0.01
(0.004)
-1.04
(1.14)
12.96
(1.10)
7.29
(1.40)
4.46
(1.45)
2.05
(1.60)
0.01
(0.004)
-1.22
(1.15)
II
III
IV
312.41
(47.28)
184.08
(95.44)
-37.63
313.09
(46.87)
184.18
(93.98)
-39.01
135.51
(62.00)
-472.86
(120.18)
-191.85
23
It Takes Three to Tango: Court, Unions and the Politics of Labor Law
QLABLAWS
POSTPER
constant
CONST
DICTATOR
U.SUPER
U.SIMPLE
DIVIDED
MEDIAN
(142.07)
-6.63
(5.56)
667.39
(120.70)
(69.69)
-2.48
(3.26)
(219.31)
(21.76)
161.53
(66.71)
I
II
1.3782
(0.10)
1.1889
(0.08)
1.1994
(0.06)
1.0754
(0.08)
-0.0043
(0.04)
STKUSUPER
STKUSIMP
STKDIV
QLABLAWS
III
1.5308
(0.10)
1.2038
(0.13)
1.2811
(0.09)
0.9983
(0.10)
0.2325
(0.16)
0.5010
(0.15)
0.5520
(0.14)
0.4456
(0.25)
-0.0011
(0.0002)
-0.0006
(0.0007)
-0.0014
(0.0002)
-0.0012
(0.0002)
-0.0441
(0.01)
-(0.05)
(0.07)
-0.0013
(0.0003)
-0.0010
(0.0011)
-0.0010
(0.0003)
-0.0011
(0.0002)
-0.0535
(0.01)
314
314
-(0.23)
(0.10)
-0.0011
(0.0004)
-0.0005
(0.0016)
-0.0008
(0.0006)
-0.0022
(0.0081)
0.0064
(0.01)
0.6866
(0.05)
0.5494
(0.09)
194
PREFCOURT
STKDIC
AGCONST
AGFORMAL
Obs.
(17.41)
-7.39
(2.07)
(167.43)
(17.45)
87.95
(23.32)
(17.42)
-7.27
(2.02)
(166.04)
(17.35)
88.72
(23.12)
IV
0.5344
(0.15)
0.4142
(0.12)
0.4142
(0.11)
0.3823
(0.25)
-0.0849
(0.09)
-0.0007
(0.0004)
0.0012
(0.0014)
0.0000
(0.0005)
-0.0015
(0.0082)
-0.0198
(0.01)
0.6758
(0.06)
0.5816
(0.09)
194
The results are consistent with the predictions of the model. The strategies of each of the
players depend on the optimal strategies of the other two. Furthermore, the results seem
to reject the symmetric information model, as we observe a subtle complementarity
between the actions of the Court and the unions, rather than the free riding that would
have been predicted by the symmetric information model. The political environment
variables in the QLABLAWS equation are all significant and match the predictions of the
theory: QLABLAWS increase with the strength of the President as measured by her
majority in Congress. The coefficient of STRIKES is negative and statistically
24
It Takes Three to Tango: Court, Unions and the Politics of Labor Law
significant, as would be expected. This is also true for the coefficient of CONST. The
negative coefficient of CONST, although not directly consistent with our model, can be
understood in that our measure of policy innovation (QLABLAWS) does not take into
account the fact that in Argentina much policy innovation is done via Presidential decrees
rather than legislation. These innovations, if upheld by the Court, would become the new
status quo. Thus, if the Court upholds the President, there is less need to introduce new
legislation.30
The strike equation is also easy to interpret using our theoretical results. As wages
decrease or unemployment increase (output decrease) the relative cost of fighting for the
union goes down, producing a higher degree of confrontation by the union in equilibrium.
The negative coefficient of CONST in this equation indicates that a challenging Court
fosters confrontation by the unions, as would be the case in the Total Conflict with
Asymmetric Information case under the assumptions presented in Proposition 9. Finally,
as was seen in Figure 2, the post Perón period has a significantly higher level of labor
conflict. This can be understood in that a main achievement of the Peronist movement
was the organization of labor unions.
The constitutional decision making equation addresses directly our main argument. The
results are consistent with our theory. The political environment variables are all
statistically significant, and are as predicted by the theory: the probability that the Court
challenges the President decreases with her majority in Congress.31 The coefficient of
MEDIAN – which measures the degree of political opposition of the Court to the
President – is negative, as predicted, although not statistically significant. We also
introduce in versions II and III a variable, PREFCOURT, which measures the pro-labor
stance of the Court. It is defined as MEDIAN when the President is against labor, and 1MEDIAN when the president is pro labor. This variable is also not highly significant.
Our model suggests that the impact of strikes differs with the power of the President.
30
We plan to revise the model to add this extra dimension in future work. Also, note that our
database of judicial decisions includes both decrees and laws.
31 The point estimate of UNIFIEDSIMPLE and UNIFIEDSUPER are higher than that of
DIVIDED, and the difference is statistically significant.
25
It Takes Three to Tango: Court, Unions and the Politics of Labor Law
Thus, we introduce various interactions of strikes and presidential power in this equation.
The coefficients of the interactions of STRIKES with the political environment variables
are negative and statistically significant, with the exception of STKUSUPER. These
results are consistent with the theory, since we only expect union’s behavior to influence
Court’s vote for intermediate majorities (although see the significant coefficient for the
interaction with DICTATOR). Finally, QLABLAWS’ coefficient is negative, indicating
that, all else held constant, the more challenging the President is, the higher the
probability of the Courts going against the President.
In versions III and IV we
introduce the Attorney General's determination on the constitutionality of the case. As in
IST(2001) we find that the AG's determination is extremely important in the Court's final
determination. Although results in versions I and II are not directly comparable with
versions III and IV because of the loss of data, we find that the political environment
variables remain highly significant. The strike interactions, though, lose their power.
4. Final Comments
Although preliminary, our evidence suggests that in Argentina, contrary to popular
beliefs, it takes three to tango. To understand the Court's constitutional interpretation of
labor law it is not enough to know its preferences and those of the polity.32 The Court
takes direct hints from unions' actions. Unions, and the President, knowing this, behave
strategically. When the Court is less prone to support the President, the unions'
incentives to take to the streets are higher. The Court takes unions' actions as a signal of
Presidential weakness, and increases its defiance of the President. Although supported by
the data, we do not claim that our model is directly applicable to all jurisdictions. Indeed,
a key feature of the model is the underlying willingness to resort to violence by both the
unions and the President to achieve their aims. Unions strike for political, not just for
industrial relations purposes. Presidents threat to impeach justices for political, not just
for judicial misconduct. Countries which for one or another reason have been able to
develop better working institutions, will also show more civilized behavior, and the types
32
See, for example, Spiller and Gely (1992) for an approach to labor statutory interpretation by
the US Supreme Court.
26
It Takes Three to Tango: Court, Unions and the Politics of Labor Law
of signals which we explore in this paper will be transmitted via more subtle ways. But, it
will still take three to tango.
27
It Takes Three to Tango: Court, Unions and the Politics of Labor Law
References
TB provided
28