Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/80851
Authors: 
Basten, Christoph
Fagereng, Andreas
Telle, Kjetil
Year of Publication: 
2012
Series/Report no.: 
KOF Working Papers, KOF Swiss Economic Institute, ETH Zurich 299
Abstract: 
We identify the causal effect of lump-sum severance payments on non-employment duration in Norway by exploiting a discontinuity in eligibility at age 50. We find that a severance payment worth 1.2 months' earnings at the median lowers the fraction re-employed after a year by six percentage points. Data on household wealth enable us to verify that the effect is decreasing in prior wealth, which supports the view that the severance pay effect should be interpreted as evidence of liquidity constraints. Finding liquidity constraints in Norway, despite its equitable wealth distribution and generous welfare state, means they are likely to exist also in other countries.
Subjects: 
Unemployment
Optimal Unemployment Insurance
Liquidity Constraints
Mental Accounting
Severance Pay
Regression Discontinuity Design
JEL: 
C41
E21
E24
J65
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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