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Redundancy Pay and Collective Dismissals

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  • Laszlo Goerke

Abstract

Redundancy payments for collective dismissals are incorporated into a Shapiro-Stiglitz model of efficiency wages. It is shown that a lump-sum payment will lower wages, leaving employment and welfare unaffected if there are neither wage-dependent taxes nor additional firing costs. If payroll taxes exceed firing costs, employment and welfare will rise with redundancy payments. If these payments are also a function of previous wages or reduce unemployment benefits, positive employment effects will be mitigated or reversed. A substitution of wage-dependent for lump-sum redundancy payments can lower employment, allowing for a continuous variation of effort.

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Bibliographic Info

Article provided by Mohr Siebeck, Tübingen in its journal FinanzArchiv.

Volume (Year): 59 (2002/2003)
Issue (Month): 1 (February)
Pages: 68-

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Handle: RePEc:mhr:finarc:urn:sici:0015-2218(2002/200302)59:1_68:rpacd_2.0.tx_2-w

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References

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  1. Fella, Giulio, 2000. "Efficiency wage and efficient redundancy pay," European Economic Review, Elsevier, vol. 44(8), pages 1473-1490, August.
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Cited by:
  1. Christian Grund, 2006. "Severance payments for dismissed employees in Germany," European Journal of Law and Economics, Springer, vol. 22(1), pages 49-71, July.
  2. repec:iza:izadps:dp875 is not listed on IDEAS
  3. Christian Grund, 2004. "Severance Payments for Dismissed Employees Severance Payments for Dismissed Employees in Germany," Bonn Econ Discussion Papers bgse4_2004, University of Bonn, Germany.

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