Mandated Severance Pay And Firing Cost Distortions: A Critical Review Of The Evidence

Severance pay mandates are an appealing job displacement insurance strategy in developing countries, which have only modest government administrative capacities, but they carry the threat of adverse indirect effects. A critical review of the empirical literature reveals that severance benefit mandates, unaccompanied by other labor regulations, have little apparent impact on labor market behaviors. Indeed many severance mandates in the industrialized world do not greatly exceed those provided voluntarily in larger firms in the U.S.

Provided by: Institute for the Study of Labor Topic: CXO Date Added: Jun 2011 Format: PDF

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