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

Listed author(s):
  • Andreas Kettemann
  • Francis Kramarz
  • Josef Zweimüller

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.

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File URL: http://www.econ.uzh.ch/static/wp/econwp256.pdf
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Paper provided by Department of Economics - University of Zurich in its series ECON - Working Papers with number 256.

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Date of creation: Jun 2017
Handle: RePEc:zur:econwp:256
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  1. 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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