What Have We Learned About the Employment Effects of Severance Pay? Further Iterations of Lazear Et Al.

29 Pages Posted: 15 Dec 2003

See all articles by John T. Addison

John T. Addison

University of South Carolina - Moore School of Business - Department of Economics; IZA Institute of Labor Economics

Paulino Teixeira

Universidade de Coimbra - Faculdade de Economia; Center for European Economic Research (ZEW)

Date Written: November 2003

Abstract

In this study we examine the contribution of severance pay to employment and unemployment development using data on industrialized OECD countries. Our starting point is Lazear's (1990) empirical dictum that severance payment requirements adversely impact the labor market. We extend his sample period and add to his parsimonious specification a variety of fixed and time-varying labor market institutions. While the positive effect of severance pay on unemployment garners some support, there is no real indication of adverse effects for (the three) other employment outcomes identified here. Moreover, with the possible exception of collective bargaining coordination, the role of institutions is also more muted than suggested in the literature.

Keywords: severance pay, employment protection, employment, labor force participation, unemployment, long-term unemployment, time-varying labor market institutions

JEL Classification: E24, J23, J64, J65

Suggested Citation

Addison, John T. and Teixeira, Paulino, What Have We Learned About the Employment Effects of Severance Pay? Further Iterations of Lazear Et Al. (November 2003). IZA Discussion Paper No. 943. Available at SSRN: https://ssrn.com/abstract=475043

John T. Addison (Contact Author)

University of South Carolina - Moore School of Business - Department of Economics ( email )

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803-777-7400 (Phone)
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HOME PAGE: http://mooreschool.sc.edu/moore/economics/profiles/addison.htm

IZA Institute of Labor Economics

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

Paulino Teixeira

Universidade de Coimbra - Faculdade de Economia ( email )

Av. Dias da Silva, 165
Coimbra, 3004-512
Portugal

Center for European Economic Research (ZEW) ( email )

P.O. Box 10 34 43
L 7,1 D-68161 Mannheim
Germany

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