Goerke, Laszlo - Institute for the Study of Labor (IZA) - 2006
In an efficiency wage economy, lump-sum severance pay from which shirkers can be excluded raises employment. However …, severance payments are usually related to wages. It is shown that earnings-related, mandated severance pay will have ambiguous … employment effects if effort can be varied continuously. A substitution of the earnings-related for the lumpsum component reduces …