Severance pay and the accuracy of judgment

Kenji Azetsu () and Taro Kumagai ()
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Kenji Azetsu: Graduate School of Economics, Kobe University
Taro Kumagai: Graduate School of Economics, Kobe University

Economics Bulletin, 2006, vol. 10, issue 1, 1-7

Abstract: We show that the severance pay scheme can serve as bond and improve the welfare. When the authority appropriately adjudges the worker's effort, the increase in a severance payment reduces the shirker''s expected benefit, so that the severance pay works as a bond, which is warranted by the authority.

JEL-codes: J4 J6 (search for similar items in EconPapers)
Date: 2006-02-02
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Citations: View citations in EconPapers (2)

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