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

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  • Holzmann, Robert

    (University of New South Wales)

  • Pouget, Yann

    (World Bank)

  • Vodopivec, Milan

    (University of Primorska)

  • 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.

Suggested Citation

  • Holzmann, Robert & Pouget, Yann & Vodopivec, Milan & Weber, Michael, 2011. "Severance Pay Programs around the World: History, Rationale, Status, and Reforms," IZA Discussion Papers 5731, Institute of Labor Economics (IZA).
  • Handle: RePEc:iza:izadps:dp5731
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    More about this item

    Keywords

    severance pay; termination benefit; end-of-service benefit; termination benefits; seniority pay; indemnities; leaving allowances;
    All these keywords.

    JEL classification:

    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings
    • K31 - Law and Economics - - Other Substantive Areas of Law - - - Labor Law

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