Parsons, Donald O. - Institute for the Study of Labor (IZA) - 2013
severance pay emerges as a natural component of job displacement insurance packages, serving both as scheduled reemployment wage … insurance and, if search moral hazard is a problem, as scheduled UI. Like any firm-financed separation expenditure, severance … cost distortions by substituting severance savings plans, which have zero firing costs. Indeed severance insurance plans …