Job displacement risk and severance pay

Arbeitspapier

This paper is a quantitative, equilibrium study of the insurance role of severance pay when workers face displacement risk and markets are incomplete. A key feature of our model is that, in line with an established empirical literature, job displacement entails a persistent fall in earnings upon re-employment due to the loss of tenure. The model is solved numerically and calibrated to the US economy. In contrast to previous studies that have analyzed severance payments in the absence of persistent earning losses, we find that the welfare gains from the insurance against job displacement afforded by severance pay are sizable.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Working Paper ; No. 795

Classification and Topics

• Classification: Wirtschaft ; Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity ; Incomplete Markets ; Computable and Other Applied General Equilibrium Models ; Unemployment Insurance; Severance Pay; Plant Closings
• Subject: Severance payments ; Incomplete markets ; Welfare

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Cozzi, Marco ; Fella, Giulio
• Event: Veröffentlichung
• (who): Queen Mary University of London, School of Economics and Finance
• (where): London
• (when): 2016

Further information

• Handle: http://hdl.handle.net/10419/175232
• Last update: 10.03.2025, 11:42 AM CET