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Matching Severance Payments with Worker Losses in the Egyptian Public Sector

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  • Assaad, Ragui
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    Abstract

    Severance pay programs can reduce political opposition and minimize the social costs of labor redundancies. In Egypt, only voluntary programs are feasible because legal limitations preclude layoffs and strong organized labor groups oppose any weakening of job security protections. A common problem with voluntary severance programs, however, is that they tend to overpay workers relative to the welfare losses they experience from displacement. This article estimates the losses that public sector workers would incur if they were displaced from their jobs and simulates several voluntary severance schemes to determine how well the schemes match compensation payments to these estimated losses. It provides a fairly strong argument for looking at the structure of opportunity costs and wage profiles when designing severance programs. It shows that significant overpayment can be avoided by matching compensation payments to the expected losses of workers. It also provides a method for estimating these losses from standard labor force surveys that are available in most countries. Copyright 1999 by Oxford University Press.

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    Bibliographic Info

    Article provided by World Bank Group in its journal World Bank Economic Review.

    Volume (Year): 13 (1999)
    Issue (Month): 1 (January)
    Pages: 117-53

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    Handle: RePEc:oup:wbecrv:v:13:y:1999:i:1:p:117-53

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    Cited by:
    1. Rama, Martin, 2003. "Globalization and workers in developing countries," Policy Research Working Paper Series 2958, The World Bank.
    2. Rama, Martin, 2001. "The gender implications of public sector downsizing : the reform program of Vietnam," Policy Research Working Paper Series 2573, The World Bank.
    3. Khan, Iram, 2006. "Public vs. private sector : an examination of neo-liberal ideology," MPRA Paper 13443, University Library of Munich, Germany.
    4. Martin Rama, 2002. "Mondialisation, inégalités et politiques de l'emploi," Revue d’économie du développement, De Boeck Université, vol. 16(1), pages 43-83.
    5. Sebastián Galiani and Federico Sturzenegger, . "The Impact of Privatization on the Earnings of Restructured Workers," Business School Working Papers longterm, Universidad Torcuato Di Tella.
    6. Assaad, Ragui & Tunali, Insan, 2002. "Wage formation and recurrent unemployment," Labour Economics, Elsevier, vol. 9(1), pages 17-61, February.
    7. World Bank, 2002. "Long-Term Policy Options for the Palestinian Economy," World Bank Other Operational Studies 15274, The World Bank.
    8. Sebastian Galiani & Federico Sturzenegger, 2008. "The Impact of Privatization on the Earnings of Restructured Workers: Evidence From the Oil Industry," Journal of Labor Research, Springer, vol. 29(2), pages 162-176, June.
    9. Bales, Sarah & Rama, Martin, 2001. "Are public sector workers underpaid? - Appropriate comparators in a developing country," Policy Research Working Paper Series 2747, The World Bank.
    10. World Bank, 2007. "Guinea-Bissau - Public Expenditure Review Update : Enhancing Growth and Fiscal Adjustment Through Civil Service Reform," World Bank Other Operational Studies 7736, The World Bank.

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