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Overcompensation by severance payments

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  • Christian Grund

Abstract

An important aim of severance payments is to reduce the economic disadvantages of dismissed employees. However, it may well be the case that a considerable fraction of employees is actually better off, if they are re-employed shortly after their dismissal. This is the first attempt to estimate the relevance of overcompensation by severance payments. It is found that about 7% of dismissed employees or about one quarter of those with severance payments are overcompensated in Germany. In particular, employees with many years of tenure have chances to receive severance payments as well as wage increases in their new jobs subsequent to dismissal.

Suggested Citation

  • Christian Grund, 2006. "Overcompensation by severance payments," Applied Economics, Taylor & Francis Journals, vol. 38(8), pages 925-930.
    • Handle: RePEc:taf:applec:v:38:y:2006:i:8:p:925-930
    DOI: 10.1080/00036840600581950
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    1. repec:bla:econom:v:62:y:1995:i:248:p:551-64 is not listed on IDEAS
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    Cited by:

    1. Frick, Bernd & Malo, Miguel A. & Garcia Martinez, Pilar & Schneider, Martin, 2012. "The Demand for Individual Grievance Procedures in Germany and Spain: Labour Law Changes versus Business Cycle/La demanda de reclamaciones laborales individuales en Alemania y España: Derecho Laboral v," Estudios de Economia Aplicada, Estudios de Economia Aplicada, vol. 30, pages 283-310, Abril.
    2. Goerke, Laszlo & Pannenberg, Markus, 2010. "An economic analysis of dismissal legislation: Determinants of severance pay in West Germany," International Review of Law and Economics, Elsevier, vol. 30(1), pages 71-85, March.
    3. José María Arranz & Carlos García Serrano, 2015. "Los sistemas de prestaciones por desempleo de “experience rating”. Un análisis de los despidos temporales y los subsidios cruzados en España," Hacienda Pública Española / Review of Public Economics, IEF, vol. 212(1), pages 129-168, March.

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