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Job mobility and creative destruction: flexicurity in the land of Schumpeter


Kettemann, Andreas; Kramarz, Francis; Zweimüller, Josef (2017). Job mobility and creative destruction: flexicurity in the land of Schumpeter. Working paper series / Department of Economics 256, University of 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.

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.

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Additional indexing

Item Type:Working Paper
Communities & Collections:03 Faculty of Economics > Department of Economics
Dewey Decimal Classification:330 Economics
JEL Classification:J63, J65
Uncontrolled Keywords:Severance pay, job mobility, flexicurity
Language:English
Date:June 2017
Deposited On:26 Jun 2017 15:48
Last Modified:26 Jun 2017 17:17
Series Name:Working paper series / Department of Economics
Number of Pages:30
ISSN:1664-7041
Official URL:http://www.econ.uzh.ch/static/wp/econwp256.pdf
Related URLs:http://www.econ.uzh.ch/static/workingpapers.php

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