Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/173416 
Year of Publication: 
2017
Series/Report no.: 
Working Paper No. 256
Publisher: 
University of Zurich, Department of Economics, Zurich
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.
Subjects: 
Severance pay
job mobility
flexicurity
JEL: 
J63
J65
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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