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Job mobility and creative destruction: flexicurity in the land of Schumpeter

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  • Andreas Kettemann
  • Francis Kramarz
  • Josef Zweimüller

Abstract

This paper evaluates the 2003 Austrian severance-pay reform, often advocated as a role model for structural reforms in countries plagued by inflexible labor markets and high unemployment. The reform replaced a system with tenure-based severance payments after a layoff (but not after a quit) by payments into pension accounts that accrue to workers after a layoff as well as after a quit. We identify the reform effects using a regression discontinuity (RD) design and find a substantial increase in job mobility in response to the reform. A search-and-matching model with on-the- job search and tenure-dependent severance payments is structurally estimated using the RD-induced empirical moments. Counterfactual policy experiments suggest that flexicurity reforms spur job creation and can substantially reduce unemployment in countries where severance payments are initially high.

Suggested Citation

  • Andreas Kettemann & Francis Kramarz & Josef Zweimüller, 2017. "Job mobility and creative destruction: flexicurity in the land of Schumpeter," ECON - Working Papers 256, Department of Economics - University of Zurich.
  • Handle: RePEc:zur:econwp:256
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    References listed on IDEAS

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    1. Bruins, Marianne & Duffy, James A. & Keane, Michael P. & Smith, Anthony A., 2018. "Generalized indirect inference for discrete choice models," Journal of Econometrics, Elsevier, vol. 205(1), pages 177-203.
    2. Guido Imbens & Karthik Kalyanaraman, 2012. "Optimal Bandwidth Choice for the Regression Discontinuity Estimator," Review of Economic Studies, Oxford University Press, vol. 79(3), pages 933-959.
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    Cited by:

    1. Martin Kerndler & Michael Reiter, 2020. "Wage Rigidities and Old-Age Unemployment," EconPol Policy Brief 22, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    2. Samuel Bentolila & Juan Jose Dolado & Juan F. Jimeno, 2019. "Dual Labour Markets Revisited," CESifo Working Paper Series 7479, CESifo.
    3. Johanna Schauer, 2018. "Labor Market Duality in Korea," IMF Working Papers 2018/126, International Monetary Fund.
    4. Antoine Bertheau & Edoardo Acabbi & Cristina Barceló & Andreas Gulyas & Stefano Lombardi & Raffaele Saggio, 2022. "The Unequal Consequences of Job Loss across Countries," CRC TR 224 Discussion Paper Series crctr224_2022_351, University of Bonn and University of Mannheim, Germany.
    5. Dolado, Juan J. & Felgueroso, Florentino & Jimeno, Juan F, 2020. "The Spanish Labour Market at the Crossroads: Covidâ? 19 meets the Megatrends," CEPR Discussion Papers 15452, C.E.P.R. Discussion Papers.
    6. João Brogueira de Sousa & Julián Díaz-Saavedra & Ramon Marimon, 2022. "Introducing an Austrian backpack in Spain," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 13(3), pages 513-556, September.
    7. Garcia-Louzao, Jose, 2022. "Workers’ job mobility in response to severance pay generosity," Labour Economics, Elsevier, vol. 75(C).
    8. B. Boutchenik & R. Lardeux, 2020. "The Take-Up of Unemployment Benefit Extensions," Documents de Travail de l'Insee - INSEE Working Papers g2020-02, Institut National de la Statistique et des Etudes Economiques.
    9. Julian Diaz Saavedra & Ramon Marimon & Joao Brogueira de Sousa, 2021. "A Worker’s Backpack as an alternative to PAYG pension systems," ThE Papers 21/15, Department of Economic Theory and Economic History of the University of Granada..

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    More about this item

    Keywords

    Severance pay; job mobility; flexicurity;
    All these keywords.

    JEL classification:

    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings

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