Job Mobility and Creative Destruction: Flexicurity in the Land of Schumpeter

79 Pages Posted: 26 Jun 2017

See all articles by Andreas Kettemann

Andreas Kettemann

University of Zurich - Department of Economics

Francis Kramarz

Independent

Josef Zweimüller

University of Zurich - Department of Economics; Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute); IZA Institute of Labor Economics

Multiple version iconThere are 2 versions of this paper

Date Written: June 2017

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.

Keywords: creative destruction, flexicurity, job creation, job mobility, Severance pay

JEL Classification: J63, J65

Suggested Citation

Kettemann, Andreas and Kramarz, Francis and Zweimueller, Josef, Job Mobility and Creative Destruction: Flexicurity in the Land of Schumpeter (June 2017). CEPR Discussion Paper No. DP12112, Available at SSRN: https://ssrn.com/abstract=2992562

Andreas Kettemann (Contact Author)

University of Zurich - Department of Economics ( email )

Plattenstrasse 14
Zürich, 8032
Switzerland

Francis Kramarz

Independent

Josef Zweimueller

University of Zurich - Department of Economics ( email )

Zuerich, 8006
Switzerland
+411 634 3724 (Phone)
+411 634 4907 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

IZA Institute of Labor Economics

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

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