IDEAS home Printed from
   My bibliography  Save this paper

An Analysis of the Effects of the Severance Pay Reform on Credit to Italian SMEs


  • Riccardo Calcagno

    () (Free University and Tinbergen Institute, Amsterdam; CeRP, Turin)

  • Roman Kraeussl

    (Free University of Amsterdam and Center for Financial Studies, Frankfurt am Main)

  • Chiara Monticone

    () (CeRP, Collegio Carlo Alberto, Turin)


In this paper we study the effects of the reform of the system of severance indemnities (TFR) currently in use for Italian employees on the cost and the access to credit for Italian small and medium-size enterprises (SMEs). The most direct consequence of the reform will be to reduce the amount of liquid assets available to Italian firms. We argue that this reform, which will produce its first effects in July 2007, will reduce the aggregate investment by SMEs in a more than proportional way in a long run, since it will restrict the access to credit for some of them (Holmstrom and Tirole, 1997). However, we also predict that the reform will not increase the cost of intermediated finance in the long run, coeteris paribus. Nonetheless, in the short-term, if the level of investment by firms can be considered as exogenous, the reform is likely to increase the cost of bank credit for SMEs. In order to perform quantitative estimates of the effect of the reform, we also estimate the future outflows of TFR from the balance sheet of the firms from data covering the whole population of Italian firms.

Suggested Citation

  • Riccardo Calcagno & Roman Kraeussl & Chiara Monticone, 2007. "An Analysis of the Effects of the Severance Pay Reform on Credit to Italian SMEs," CeRP Working Papers 59, Center for Research on Pensions and Welfare Policies, Turin (Italy).
  • Handle: RePEc:crp:wpaper:59

    Download full text from publisher

    File URL:
    Download Restriction: no


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Holzmann, Robert & Pouget, Yann & Vodopivec, Milan & Weber, Michael, 2011. "Severance pay programs around the world : history, rationale, status, and reforms," Social Protection and Labor Policy and Technical Notes 62726, The World Bank.

    More about this item


    severance indemnities; moral hazard; credit constraints;

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:crp:wpaper:59. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Silvia Maero). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.