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What Have We Learned About the Employment Effects of Severance Pay? Further Iterations of Lazear et al

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  • Addison, John T.

    ()
    (University of South Carolina)

  • Teixeira, Paulino

    ()
    (University of Coimbra)

Abstract

In this study we examine the contribution of severance pay to employment and unemployment development using data on industrialized OECD countries. Our starting point is Lazear’s (1990) empirical dictum that severance payment requirements adversely impact the labor market. We extend his sample period and add to his parsimonious specification a variety of fixed and time-varying labor market institutions. While the positive effect of severance pay on unemployment garners some support, there is no real indication of adverse effects for (the three) other employment outcomes identified here. Moreover, with the possible exception of collective bargaining coordination, the role of institutions is also more muted than suggested in the literature.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 943.

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Length: 29 pages
Date of creation: Nov 2003
Date of revision:
Publication status: published in: Empirica, 2005, 32 (3-4), 345-368
Handle: RePEc:iza:izadps:dp943

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Keywords: time-varying labor market institutions; employment protection; employment; labor force participation; unemployment; severance pay; long-term unemployment;

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  1. Di Tella, Rafael & MacCulloch, Robert, 2005. "The consequences of labor market flexibility: Panel evidence based on survey data," European Economic Review, Elsevier, Elsevier, vol. 49(5), pages 1225-1259, July.
  2. Stephen Nickell, 1997. "Unemployment and Labor Market Rigidities: Europe versus North America," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 11(3), pages 55-74, Summer.
  3. Ferrer, Ana M. & Riddell, W. Craig, 2009. "Unemployment insurance savings accounts in Latin America : overview and assessment," Social Protection Discussion Papers 49173, The World Bank.
  4. Juan Botero & Simeon Djankov & Rafael LaPorta & Florencio López-de-Silanes & Andrei Shleifer, . "The Regulation of Labor," Working Paper 19483, Harvard University OpenScholar.
  5. Miguel Jaramillo & Jaime Saavedra, 2005. "Severance Payment Programs in Latin America," Empirica, Springer, Springer, vol. 32(3), pages 275-307, 09.
  6. Carmen Pagés-Serra & James J. Heckman, 2000. "The Cost of Job Security Regulation: Evidence from Latin American Labor Markets," IDB Publications 4119, Inter-American Development Bank.
  7. Giuseppe Bertola & Francine D. Blau & Lawrence M. Kahn, 2001. "Comparative Analysis of Labor Market Outcomes: Lessons for the US from International Long-Run Evidence," NBER Working Papers 8526, National Bureau of Economic Research, Inc.
  8. John T. Addison & Paulino Teixeira, 2003. "The Economics of Employment Protection," Journal of Labor Research, Transaction Publishers, Transaction Publishers, vol. 24(1), pages 85-129, January.
  9. John T. Addison & Paulino Teixeira & Jean-Luc Grosso, 2000. "The Effect of Dismissals Protection on Employment: More on a Vexed Theme," Southern Economic Journal, Southern Economic Association, Southern Economic Association, vol. 67(1), pages 105-122, July.
  10. Blanchard, Olivier & Wolfers, Justin, 2000. "The Role of Shocks and Institutions in the Rise of European Unemployment: The Aggregate Evidence," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 110(462), pages C1-33, March.
  11. Lazear, Edward P, 1990. "Job Security Provisions and Employment," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 105(3), pages 699-726, August.
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Cited by:
  1. World Bank, 2009. "Federative Republic of Brazil - Social Insurance and Labor Supply : Assessing Incentives and Redistribution," World Bank Other Operational Studies 12667, The World Bank.
  2. Mark Bahnisch & John Quiggin, 2006. "IR Reform: Choice and Compulsion," Australian Public Policy Program Working Papers WP2P06, Risk and Sustainable Management Group, University of Queensland.
  3. Roberto M Samaniego, 2004. "Does Employment Protection Inhibit Technical Diffusion?," Computing in Economics and Finance 2004, Society for Computational Economics 51, Society for Computational Economics.
  4. Frick, Bernd & Malo, Miguel A. & Garcia Martinez, Pilar & Schneider, Martin, 2012. "The Demand for Individual Grievance Procedures in Germany and Spain: Labour Law Changes versus Business Cycle/La demanda de reclamaciones laborales individuales en Alemania y España: Derecho Laboral ," Estudios de Economía Aplicada, Estudios de Economía Aplicada, Estudios de Economía Aplicada, vol. 30, pages 283-310, Abril.
  5. Roberto M. Samaniego, 2006. "Employment Protection and High-Tech Aversion," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 9(2), pages 224-241, April.
  6. Christian Merkl, 2009. "The Inflation-Output Tradeoff: Which Type of Labor Market Rigidity Is to Be Blamed?," Kiel Working Papers, Kiel Institute for the World Economy 1495, Kiel Institute for the World Economy.
  7. Roberto M. Samaniego, 2008. "Entry, Exit and Business Cycles in a General Equilibrium Model," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(3), pages 529-541, July.
  8. Holzmann, Robert & Pouget, Yann & Vodopivec, Milan & Weber, Michael, 2011. "Severance pay programs around the world : history, rationale, status, and reforms," Social Protection Discussion Papers 62726, The World Bank.

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