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The purpose of this paper is to understand labor market regulations and their consequences for the allocation of resources.

This paper constructs a theoretical model to study labor market regulations in developing countries and how it affects the allocation of resources between the less productive informal activities and more productive formal activities. It also provides empirical support for some theoretical results using cross-country data.

When workers are risk-averse and the market for insurance against labor income risk is missing, regulations that provide insurance to workers (such as severance payments) reduce misallocation. However, regulations that simply create barriers to the dismissal of workers increase misallocation and end up reducing the welfare of workers. This study also provides some empirical evidence broadly consistent with the theoretical results using cross-country data. While dismissal regulations increase the share of informal employment, severance payments to workers do not.

The empirical exercise is constrained by the lack of availability of good data on the informal sector.

The analysis of the alternative labor market regulations analyzed in this paper in the presence of risk-averse workers is an original contribution to the literature.

Examines the situation in the UK in some detail with regard to three aspects of the Charter of Fundamental Human Rights of the European Union. Looks at the aims, together with an analysis and appraisal. Considers, first, information and consultation rights with regards to the transfer of undertakings and redundancies, followd by the right to collective action and, lastly, protection in the event of unjustifiable dismissal. Presents case law throughout as examples. Concludes that the UK has attempted to prevent social and economic rights for workers from being included in the final charter despite fierce opposition. Compares this view together with the UK suspicion of Europe against the views of the other member states.

Shareholders and managers can work in a hierarchy in which principals attempt to control the actions of agents to achieve the wealth objective. Alternatively, shareholders and managers can work together as a cooperative team in which shareholders provide financial capital and managers provide human capital. The authors aim to examine the different implications for value creation provided by the two approaches.

By comparing the literature on the value implications of the incomplete contracting framework and control arrangements in principal-agent hierarchies, the authors identify deviations from optimal outcomes and suggest solutions.

The review indicates that a cooperative framework has some advantages over the hierarchical model. The stability of human capital and the relationship between managers and shareholders can be enhanced when shareholders provide capital in increments which vest over time and latitude for renegotiation of agreements is built into contracts.

By surrendering control using stock options programmes, managers are free to invest in relationship-specific assets. Shareholders can control the provision of capital by withdrawing investment if insufficient returns are realized, i.e. if stock options do not meet vesting requirements. The market can then be left to do its work.

This paper provides an original review of literature on cooperation and hierarchies in the shareholder–manager relationship and proposes solutions to identified deviations from optimal outcomes.

NOW here is Mr. Leslie Huckfield speaking at the annual conference of the British Council of Productivity Associations. He (but of course!) is Parliamentary Under‐Secretary of State at the Department of Industry. He said “The Budget recognises the need to increase incentives at all levels in industry and particularly to improve the position of skilled workers and middle managers.”

Employment protection legislation defines social criteria according to which firms can dismiss workers. If firms evade the law, then negotiation about compensation begins. To reduce the legal and financial uncertainty often associated with ex post bargaining, the German government stipulate severance payments in the case of mutual agreements in law in 2004. This paper aims to examine whether social criteria affect the dismissal probability of workers.

The probability of receiving compensation and the factors determining the amount of severance payment are estimated when it comes to private negotiations about the termination of an employment contract. In addition, the effect of the reform of the employment protection legislation on the probability of receiving compensation and the amount of redundancy pay is analysed. A stepwise estimation strategy is developed to account for sample selection bias when examining which workers receive severance payments and the determinants of severance pay variation. Empirical evidence is provided using German panel data for the period 2000‐2006.

The paper shows that workers protected by law have the lowest probability of being dismissed. The expected severance payment and firm size increase the probability of receiving compensation while the amount of severance payment depends significantly on the way the employment relationship is dissolved. Contrary to the intention of the legislator, the reform increases the level of compensation.

The paper fills a gap in the literature by taking into account selectivity bias when estimating the probability of receiving redundancy pay and the size of compensation. The evidence also provides insights which may be useful for the ongoing discussion to reform employment protection legislation in Germany.

The purpose of this paper is to compare two elements of lay-off costs in a dynamic model of the labor market and analyze the differences for business cycle dynamics and welfare.

The paper builds a general equilibrium Real Business Cycle model and introduces firing costs and severance payments. Labor market frictions are assumed to follow the famous search and matching approach.

The paper finds that firing costs imply a higher volatility over the cycle and have stronger negative welfare effects. Severance payments have a lower volatility, reduce unemployment, and reduce welfare by a smaller amount.

Policy reforms should be aimed to use severance payments and reduce the ring cost component of lay-off costs.

Increasing welfare and a more stable business cycle could be supported by using severance payments instead of firing costs.

The purpose of this paper is to investigate the effect of executive severance contract maturity policies on the likelihood of forced turnover and the length of tenure for CEOs who are forced from their positions.

The paper utilizes logistic and accelerated failure time models to test the hypothesis that severance contracts decrease information asymmetries resulting in an increased likelihood of forced turnover and a shortened tenure for those CEOs who are forced out.

The results provide evidence that fixed‐term severance contracts increase the likelihood of forced tenure and decrease the length of tenure for CEOs who experience a forced turnover during the period, while time‐independent contracts do not.

The limitation is the possibility that an omitted variable jointly determines the likelihood of the presence of a severance contract and the effect on forced turnover. Future research should investigate other possibilities beyond the CEO coming from outside of the firm.

The findings confirm that the maturity policies of severance contracts affect forced turnover. The results suggest that there may be a benefit in designing severance contracts to expire to encourage more efficient turnover of underperforming CEOs.

This paper contributes to the empirical corporate finance and accounting literature by differentiating between forced and unforced turnover when analyzing the effects of severance contracts and demonstrating that the time dimension of severance contracts may provide the desired result of encouraging the identification of CEO‐firm mismatches.

December 13, 1973 Master and Servant — Negligence — Manual lifting operation — Load caught on obstruction increasing effective weight — Two men sharing load near safe limit — Whether foreseeable risk that one man would receive a disproportionate share of load — Meaning of maximum safe load.

The purpose of this paper is to study the impact of the 2007 Italian severance payment reform on the cost and the access to credit for small‐ and medium‐sized enterprises (SMEs).

The authors study the implications of the reform adapting the theoretical credit‐rationing model of Holmstrom and Tirole, then estimate the capital outflows due to the reform and, using the theoretical prediction, assess its impact using mathematical simulations.

The authors predict that the reform may cause severe credit constraints to SMEs which cannot pledge enough collateral in order to obtain credit. The most direct consequences are to reduce in the long run the amount of liquid assets available to Italian firms, and to reduce their aggregate investment in a more than proportional way, due to access to credit restrictions. However, it will not increase the cost of intermediated finance, ceteris paribus.

The fact that the reform restricts access to credit, but does not increase the cost of debt, has important policy consequences, as public interventions subsidizing credit through a constant cost of debt may be ineffective.

While the topic has been analyzed in several respects (e.g. workers' participation to the reform, cost of an access to credit subsidy, etc.), no other study proposed an integrated view of these effects with a rigorous micro‐economic approach.

Looks at a union model where a trade union leader represents union members in dealing with the firm. The union leader is risk neutral and derives his utility solely from the union fees. The employment level is efficient, and equivalent to the contracts without a union leader, when the unemployed receive severance pay and wages and employment is included in the contract. In this case the outcome of the contract does not depend on whether severance pay is paid by the firm or is as a result of internal redistribution of income from employed to unemployed members. In contrast with the efficient bargaining literature, less than efficient levels of employment arise if severance pay is excluded. It is in the interest of the union leader that the unemployed receive no severance pay. This leads to a conflict of interest between the union leader and the members of the union.