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Severance Pay Programs around the World: History, Rationale, Status, and Reforms

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Author Info

  • Holzmann, Robert

    ()
    (University of Malaya)

  • Pouget, Yann

    (World Bank)

  • Vodopivec, Milan

    ()
    (International School for Social and Business Studies, Celje, Slovenia)

  • Weber, Michael

    ()
    (World Bank)

Abstract

The paper examines severance pay programs around the world by providing the first ever overview of existing programs, examining their historic development, assessing their economic rationale and describing current reform attempts. While a significant part of the paper is devoted to a comprehensive 183 cross country review of existing severance arrangements and their characteristics, the paper goes beyond a mere description. It develops and empirically tests three hypotheses about the economic rationale of the program, namely severance pay being: (i) a primitive income protection program, (ii) an efficiency enhancing human resource instrument, and (iii) a job protection instrument. The paper also reviews the recent reforms of Austria, Chile, Italy and Korea.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 5731.

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Length: 79 pages
Date of creation: May 2011
Date of revision:
Handle: RePEc:iza:izadps:dp5731

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Related research

Keywords: severance pay; termination benefit; end-of-service benefit; termination benefits; seniority pay; indemnities; leaving allowances;

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References

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Citations

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Cited by:
  1. Jahn, Elke J. & Wagner, Thomas, 2005. "Contractual Employment Protection and the Scarring Risk of Unemployment," IZA Discussion Papers 1813, Institute for the Study of Labor (IZA).
  2. Roberto M. Samaniego, 2006. "Employment Protection and High-Tech Aversion," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 9(2), pages 224-241, April.
  3. Nagler, Paula, 2013. "How unemployment insurance savings accounts affect employment duration: Evidence from Chile," MERIT Working Papers 039, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
  4. Milan Vodopivec & Lilijana Madjar & Primoz Dolenc, 2009. "Empirical Analysis of the Severance Pay Non-Performance in Slovenia," Managing Global Transitions, University of Primorska, Faculty of Management Koper, vol. 7(4), pages 333-348.
  5. Parsons, Donald O., 2010. "The Firing Cost Implications of Alternative Severance Pay Designs," IZA Discussion Papers 4967, Institute for the Study of Labor (IZA).
  6. Meltem A. Aran, 2013. "Welfare Impact of the Global Financial Crisis of 2008-2009 on Turkish Households," Ekonomi-tek - International Economics Journal, Turkish Economic Association, vol. 2(2), pages 13-52, May.
  7. Samaniego, Roberto M., 2008. "Can technical change exacerbate the effects of labor market sclerosis," Journal of Economic Dynamics and Control, Elsevier, vol. 32(2), pages 497-528, February.
  8. David Margolis & Lucas Navarro & David A. Robalino, 2014. "Unemployment Insurance, Job Search, and Informal Employment," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-00714372, HAL.
  9. Adriana Kugler, 2004. "Wage-Shifting Effects of Severance Payments Savings Accounts in Colombia," Working Papers 132, Barcelona Graduate School of Economics.
  10. Paula Nagler, 2013. "How unemployment insurance savings accounts affect employment duration: evidence from Chile," IZA Journal of Labor & Development, Springer, vol. 2(1), pages 1-25, December.
  11. Parsons, Donald O., 2011. "Mandated Severance Pay and Firing Cost Distortions: A Critical Review of the Evidence," IZA Discussion Papers 5776, Institute for the Study of Labor (IZA).
  12. David Robalino & Michael Weber, 2013. "Designing and implementing unemployment benefit systems in middle and low income countries: beyond risk-pooling vs savings," IZA Journal of Labor Policy, Springer, vol. 2(1), pages 1-20, December.
  13. Ferrer, Ana & Riddell, W. Craig, 2011. "Unemployment Insurance Savings Accounts in Latin America: Overview and Assessment," IZA Discussion Papers 5577, Institute for the Study of Labor (IZA).
  14. Milan Vodopivec, 2013. "Introducing unemployment insurance to developing countries," IZA Journal of Labor Policy, Springer, vol. 2(1), pages 1-23, December.
  15. Parsons, Donald O., 2013. "Understanding Severance Pay," IZA Discussion Papers 7641, Institute for the Study of Labor (IZA).

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