Anmerkungen:
In: Review of Economic Dynamics, Vol. 31, January 2019, Pages 411-435
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments October 1, 2018 erstellt
Beschreibung:
We analyze the effects of government-mandated severance payments in a rich life-cycle model with search-matching frictions in the labor market, risk-averse agents and imperfect insurance against idiosyncratic shocks. Our model emphasizes a tension between worker-firm wage bargains and consumption smoothing: entry wages respond to expected future severance payments by tilting downwards, which runs counter to having a smooth consumption path. Quantitatively, we find that these wage-shifting effects are sizable enough for severance payments to produce large welfare losses. Our assessment contrasts sharply with previous studies that restricted the extent of worker-firm bargaining to analyze the welfare implications of severance payments