Job Mobility and Creative Destruction: Flexicurity in the Land of Schumpeter

Zweimüller, Josef, Andreas Kettemann and Francis Kramarz ()
Authors registered in the RePEc Author Service: Josef Zweimüller ()

No 12112, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This paper evaluates the 2003 Austrian severance-pay reform, often advocated as a role model for structural reforms in countries plagued by inflexible labor markets and high unemployment. The reform replaced a system with tenure-based severance payments after a layoff (but not after a quit) by payments into pension accounts that accrue to workers after a layoff as well as after a quit. We identify the reform effects using a regression discontinuity (RD) design and find a substantial increase in job mobility in response to the reform. A search-and-matching model with on-the-job search and tenure-dependent severance payments is structurally estimated using the RD-induced empirical moments. Counterfactual policy experiments suggest that flexicurity reforms spur job creation and can substantially reduce unemployment in countries where severance payments are initially high.

Keywords: Severance pay; Job mobility; Flexicurity; Creative destruction; Job creation (search for similar items in EconPapers)
JEL-codes: J63 J65 (search for similar items in EconPapers)
Date: 2017-06
New Economics Papers: this item is included in nep-eur and nep-lab
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (19)

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Working Paper: Job mobility and creative destruction: flexicurity in the land of Schumpeter (2017)
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