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Title:'Take it or go to court': The impact of sec. 1a of the German protection against dismissal act on severance payments PDF Logo
Authors:Goerke, Laszlo
Pannenberg, Markus
Issue Date:2010
Series/Report no.:CESifo working paper Labour Markets 3120
Abstract:In 2004, a section was added to the German Protection against Dismissal Act, establishing a new procedure to dismiss an employee, given a predetermined severance payment. Most legal scholars presume the change to be without impact, while a minority of experts claims it to be either beneficial or unfavourable to employees. Our theoretical model suggests that firms will use the new procedure, but that the change in payoffs is indeterminate and, therefore, an empirical issue. Exploiting the fact that collective dismissals are not directly affected by the amendment, difference-in-differences estimates based on panel data for West Germany indicate that the legal change did have a negative effect on severance pay.
Subjects:panel data
Protection against Dismissal Act
severance pay
JEL:J65
K31
C23
Document Type:Working Paper
Appears in Collections:CESifo Working Papers, CESifo Group Munich

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