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Matching Severance Payments with Worker Losses in the Egyptian Public Sector

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  • Assaad, Ragui

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.

Suggested Citation

  • Assaad, Ragui, 1999. "Matching Severance Payments with Worker Losses in the Egyptian Public Sector," World Bank Economic Review, World Bank Group, vol. 13(1), pages 117-153, January.
  • Handle: RePEc:oup:wbecrv:v:13:y:1999:i:1:p:117-53
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    Cited by:

    1. Caroline Krafft & Ragui Assaad, 2015. "Inequality of Opportunity in the Labor Market for Higher Education Graduates in Egypt and Jordan," Working Papers 932, Economic Research Forum, revised Aug 2015.
    2. Khan, Iram, 2006. "Public vs. private sector : an examination of neo-liberal ideology," MPRA Paper 13443, University Library of Munich, Germany.
    3. Caroline Krafft, 2016. "Why is Fertility on the Rise in Egypt? The Role of Women’s Employment Opportunities," Working Papers 1050, Economic Research Forum, revised 09 Jan 2016.
    4. MartÌn Rama, 2002. "The Gender Implications of Public Sector Downsizing: The Reform Program of Vietnam," World Bank Research Observer, World Bank Group, vol. 17(2), pages 167-189, September.
    5. Assaad, Ragui & Tunali, Insan, 2002. "Wage formation and recurrent unemployment," Labour Economics, Elsevier, vol. 9(1), pages 17-61, February.
    6. 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.
    7. Martin Rama, 2002. "Globalization and Workers in Developing Countries," Economics Study Area Working Papers 41, East-West Center, Economics Study Area.
    8. Sebastián Galiani and Federico Sturzenegger, "undated". "The Impact of Privatization on the Earnings of Restructured Workers," Business School Working Papers longterm, Universidad Torcuato Di Tella.
    9. World Bank, 2002. "Long-Term Policy Options for the Palestinian Economy," World Bank Other Operational Studies 15274, 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.
    11. 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.
    12. Martin Rama, 2002. "Mondialisation, inégalités et politiques de l'emploi," Revue d’économie du développement, De Boeck Université, vol. 10(1), pages 43-83.
    13. Ragui Assaad & Caroline Krafft & John Roemer & Djavad Salehi-Isfahani, 2016. "Inequality of Opportunity in Income and Consumption in Egypt," Working Papers 1002, Economic Research Forum, revised May 2016.

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