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

University of Zurich, Department of Economics, Working Paper No. 256

77 Pages Posted: 28 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 14, 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: severance pay, job mobility, flexicurity

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 14, 2017). University of Zurich, Department of Economics, Working Paper No. 256, Available at SSRN: https://ssrn.com/abstract=2993376 or http://dx.doi.org/10.2139/ssrn.2993376

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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