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Long-term consequences of an innovative redundancy-retraining project: The Austrian Steel Foundation

In the late 1980s privatization and down-sizing of nationalized steel mills and related firms in the metal industry have lead to large-scale redundancy plans. A special Steel Foundation was created as part of a social plan. This foundation acted like an independent training center, where displaced workers would spend relatively long training periods (sometimes several years), obtaining personality and orientation training, as well as formal education. The last step of the integrative program was placement assistance as well as assistance for creating one’s own business. The foundation was financed by (higher) contributions from unemployment insurance funds, by the previous firms themselves, as well as by a collectively-bargained special tax on the remaining workers in the steel firms. Moreover the trainees themselves would have to support the foundation by giving up the interest accruing to their redundancy payments. I use combined data from Austrian social security records and from the Employment Service to look at participation decisions and on post-foundation economic performance, i.e. days worked and wage growth. As a control group I take all displaced workers from the firms who formed the foundation, using Instrumental Variables to solve the selection problem. The results show considerable wage gains - even for a period of five years after leaving the Foundation - as well as improved employment prospects. Finally, a cost-benefit analysis is performed to assess the long-term success of the Foundation.

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Paper provided by Department of Economics, Johannes Kepler University Linz, Austria in its series Economics working papers with number 2000-29.

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Date of creation: Dec 2000
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Handle: RePEc:jku:econwp:2000_29
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Web page: http://www.econ.jku.at/

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  1. David Card, 1993. "Using Geographic Variation in College Proximity to Estimate the Return to Schooling," Working Papers 696, Princeton University, Department of Economics, Industrial Relations Section..
  2. John P Martin, 1998. "What Works Among Active Labour Market Policies: Evidence from OECD Countries' Experiences," RBA Annual Conference Volume, in: Guy Debelle & Jeff Borland (ed.), Unemployment and the Australian Labour Market Reserve Bank of Australia.
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  5. Fersterer, Josef & Winter-Ebmer, Rudolf, 1999. "Are Austrian Returns to Education Falling Over Time?," IZA Discussion Papers 72, Institute for the Study of Labor (IZA).
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  7. Zweimuller, Josef & Winter- Ebmer, Rudolf, 1992. "Manpower Training Programs and Employment Stability," Institute for Research on Labor and Employment, Working Paper Series qt87z0674q, Institute of Industrial Relations, UC Berkeley.
  8. Luis Toharia & Antonio Ojeda, 1999. "The Management of Redundancies in Europe: The Case of Spain," LABOUR, CEIS, vol. 13(1), pages 237-267, 03.
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