Mitigating Mobility Frictions: The Effect of Cash-on-Hand on Labor Mobility

Karim Bekhtiar and Rudolf Winter-Ebmer
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Karim Bekhtiar: Institute for Advanced Studies (IHS) Vienna and IZA@LISER
Rudolf Winter-Ebmer: Johannes Kepler University Linz, Institute for Advanced Studies (IHS) Vienna, CEPR, IZA@LISER and Rockwool Foundation Berlin

No 3, IHS Discussion Papers from Institute for Advanced Studies

Abstract: Providing recently laid offworkers with cash benefits may help them overcome mobility costs and thereby stimulate labor mobility. On the other hand, cash benefits may dampen the employment shock and reduce the incentive to move. In this paper, we test these two competing mechanisms against each other. For this we use a severance pay regulation in Austria, which generated a sharp cutoff after which workers became eligible to a severance payment of two monthly salaries. Our results indicate that this cash payment increased labor mobility by around 8% to 12%. This increase is much stronger for worker groups with lower baseline mobility rates.

Keywords: Unemployment; labor mobility; internal migration; commuting (search for similar items in EconPapers)
JEL-codes: J18 J61 J65 R23 (search for similar items in EconPapers)
Pages: pages 39
Date: 2026-03
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https://irihs.ihs.ac.at/id/eprint/7439/ First version, 2026 (application/pdf)

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