Firing costs, severance payments, judicial mistakes and unemployment

Nikolai Stähler

Labour Economics, 2008, vol. 15, issue 6, 1162-1178

Abstract: In the discussion about employment protection, little attention has been given to judicial mistakes. In most countries, only in the case of dismissals due to economic reasons, the employee is entitled to a severance payment. Given judicial mistakes when reviewing a dismissal, shirkers might falsely receive a severance payment while non-shirker might not. At fighting unemployment, increasing the level of severance payments can increase employment for small judicial mistakes and effectively dominate the pure firing costs which leave ambiguous effects on employment. For large judicial mistakes, the opposite can hold and severance payments can decrease employment.

Keywords: J; 41; J; 64; J; 65; J; 68; Employment; protection; Judicial; mistakes; Matching; models; Shirking; Unemployment (search for similar items in EconPapers)
Date: 2008
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

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