A substantial share of severance payments derives from private contracts or collective agreements. This paper studies the determination of these payments. We analyze joint bargaining over wages and severance payments in a search and matching model with risk-averse workers. Individual bargaining results in levels of severance pay providing full insurance, which depend on unemployment benefits and job finding rates.Unions also choose full insurance. Because their higher wage demands reduce job creation, this requires higher severance pay. Severance pay observed in 8 European countries to which we calibrate the model lies between predictions from the bargaining and union scenarios.

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The safe haven property of the Swiss franc presents a specific challenge for internationally minded Swiss-based investors. The central issue is whether the traditional under-performance of Swiss assets is made up by the secular appreciation of the Swiss franc combined with the propensity of the safe haven to strengthen in times of market stress. In this paper, we review the evidence on the terms of this challenge. We conclude that a Swiss bias in asset allocation can lead to considerable return shortfalls over the long run and that systematic currency hedging would not have been historically justified and is unlikely to be in the future. Assuming a fair amount of currency risk thus appears inevitable for long-run Swiss-based investors.