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

79 Pages Posted: 31 May 2011

See all articles by Robert Holzmann

Robert Holzmann

University of Malaya; IZA Institute of Labor Economics; CESifo (Center for Economic Studies and Ifo Institute); World Bank

Yann Pouget

affiliation not provided to SSRN

Milan Vodopivec

World Bank - Human Development Network; IZA Institute of Labor Economics

Michael Weber

affiliation not provided to SSRN

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.

Keywords: severance pay, termination benefit, end-of-service benefit, termination benefits, seniority pay, indemnities, leaving allowances

JEL Classification: J33, J65, K31

Suggested Citation

Holzmann, Robert and Pouget, Yann and Vodopivec, Milan and Weber, Michael, Severance Pay Programs Around the World: History, Rationale, Status, and Reforms. IZA Discussion Paper No. 5731, Available at SSRN: https://ssrn.com/abstract=1855183

Robert Holzmann (Contact Author)

University of Malaya ( email )

University of Malaya
Kuala Lumpur, Wilayah Persekutuan 50603
Malaysia

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

Yann Pouget

affiliation not provided to SSRN

No Address Available

Milan Vodopivec

World Bank - Human Development Network ( email )

1818 H Street, NW
Washington, DC 20433
United States

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Michael Weber

affiliation not provided to SSRN

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