Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/34136
Authors: 
Goerke, Laszlo
Year of Publication: 
2006
Series/Report no.: 
IZA Discussion Papers 2232
Abstract: 
In an efficiency wage economy, lump-sum severance pay from which shirkers can be excluded raises employment. However, severance payments are usually related to wages. It is shown that earnings-related, mandated severance pay will have ambiguous employment effects if effort can be varied continuously. A substitution of the earnings-related for the lump-sum component reduces employment. Thus, the prevalent form of severance payments in OECD countries might have less advantageous employment effects than previously conjectured.
Subjects: 
earnings relationship
efficiency wages
employment
severance pay
JEL: 
J32
J41
J65
Document Type: 
Working Paper

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