American Economic Journal:
Macroeconomics
ISSN 1945-7707 (Print) | ISSN 1945-7715 (Online)
Time to Say Goodbye: The Macroeconomic Implications of Termination Notice
American Economic Journal: Macroeconomics
(pp. 262–311)
Abstract
Insuring households against unemployment risk is a cornerstone of modern economic policy. Many countries provide unemployment insurance partly by employment protection mandates, most commonly using termination notice mandates. Unlike unemployment insurance benefits, termination notices can stimulate search effort by the unemployed. I formalize this idea using a calibrated heterogeneous agents model, show how termination notice alters the incentives of firms and workers, and study the insurance role of a termination notice in general equilibrium. I demonstrate how termination notice mandates and unemployment insurance benefits are complementary policies. Finally, I also compare termination notice and severance pay.Citation
Ifergane, Tomer. 2025. "Time to Say Goodbye: The Macroeconomic Implications of Termination Notice." American Economic Journal: Macroeconomics 17 (4): 262–311. DOI: 10.1257/mac.20220262Additional Materials
JEL Classification
- D31 Personal Income, Wealth, and Their Distributions
- D52 Incomplete Markets
- E24 Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
- J23 Labor Demand
- J64 Unemployment: Models, Duration, Incidence, and Job Search
- J65 Unemployment Insurance; Severance Pay; Plant Closings