Understanding the Determination of Severance Pay: Mandates, Bargaining, and Unions

Stéphane Auray, Samuel Danthine and Markus Poschke

Scandinavian Journal of Economics, 2020, vol. 122, issue 3, 1073-1111

Abstract: A substantial share of severance payments derives from private contracts or collective agreements. In this paper, we study the determination of these payments. We analyze joint bargaining over wages and severance payments in a search‐and‐matching model with risk‐averse workers. Individual bargaining results in levels of severance pay that provide full insurance, but also depend on unemployment benefits and job‐finding rates. Unions also choose full insurance. Because their higher wage demands reduce job creation, this requires higher severance pay. Severance pay observed in eight European countries, to which we calibrate the model, lies between predictions from the bargaining and union scenarios.

Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
https://doi.org/10.1111/sjoe.12367

Related works:
Working Paper: Understanding the Determination of Severance Pay: Mandates, Bargaining, and Unions (2020)
Working Paper: Understanding the Determination of Severance Pay: Mandates, Bargaining, and Unions (2020)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:scandj:v:122:y:2020:i:3:p:1073-1111

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0347-0520

Access Statistics for this article

Scandinavian Journal of Economics is currently edited by Richard Friberg, Matti Liski and Kjetil Storesletten

More articles in Scandinavian Journal of Economics from Wiley Blackwell
Bibliographic data for series maintained by Wiley Content Delivery ().