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Is Short-Time Work a Good Method to Keep Unemployment Down?

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Author Info

  • Cahuc, Pierre

    ()
    (Ecole Polytechnique, Paris)

  • Carcillo, Stéphane

    ()
    (OECD)

Abstract

Short-time work compensation aims at reducing lay-offs by allowing employers to temporarily reduce hours worked while compensating workers for the induced loss of income. These programs are now widespread in the OECD countries, notably following the 2008-2009 crisis. This paper discusses the efficiency of this type of policy and investigates its impact on unemployment and employment. There is some evidence that short-time compensation programs stabilize permanent employment and reduce unemployment during downturns. All in all, it seems that short-time work programs used in the recent downturn had significant beneficial effects. This suggests that countries which do not have short-time compensation programs could benefit from their introduction. But short-time compensation programs can also induce inefficient reductions in working hours and reduce the prospects of outsiders if used too intensively. Thus, the design of short-time compensation programs should include an experience-rating component.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 5430.

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Length: 34 pages
Date of creation: Jan 2011
Date of revision:
Handle: RePEc:iza:izadps:dp5430

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Keywords: short-time work; unemployment; employment;

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References

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  1. Alberto Alesina & Yann Algan & Pierre Cahuc & Paola Giuliano, UCLA, 2010. "Family Values and the Regulation of Labor," Working Papers 2010.56, Fondazione Eni Enrico Mattei.
  2. Fredriksson, Peter & Holmlund, Bertil, 2003. "Improving Incentives in Unemployment Insurance: A Review of Recent Research," Working Paper Series 2003:10, Uppsala University, Department of Economics.
  3. Quentin David & Alexandre Janiak & Etienne Wasmer, 2009. "Local social capital and geographical mobility," CREA Discussion Paper Series 09-11, Center for Research in Economic Analysis, University of Luxembourg.
  4. Cahuc, Pierre & Zylberberg, Andre, 2005. "Optimum Income Taxation and Layoff Taxes," CEPR Discussion Papers 5170, C.E.P.R. Discussion Papers.
  5. Van Audenrode, Marc A, 1994. "Short-Time Compensation: Job Security, and Employment Contracts: Evidence from Selected OECD Countries," Journal of Political Economy, University of Chicago Press, vol. 102(1), pages 76-102, February.
  6. Katharine G. Abraham & Susan N. Houseman, 1993. "Does Employment Protection Inhibit Labor Market Flexibility? Lessons from Germany, France, and Belgium," NBER Working Papers 4390, National Bureau of Economic Research, Inc.
  7. Calavrezo, Oana & Duhautois, Richard & Walkowiak, Emmanuelle, 2010. "Short-Time Compensation and Establishment Exit: An Empirical Analysis with French Data," IZA Discussion Papers 4989, Institute for the Study of Labor (IZA).
  8. Alexander Hijzen & Danielle Venn, 2011. "The Role of Short-Time Work Schemes during the 2008-09 Recession," OECD Social, Employment and Migration Working Papers 115, OECD Publishing.
  9. repec:dlw:wpaper:09-10. is not listed on IDEAS
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Citations

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Cited by:
  1. Sandrine Levasseur, 2011. "labour markets adjustments in Estonia during the global crisis," Documents de Travail de l'OFCE 2011-25, Observatoire Francais des Conjonctures Economiques (OFCE).
  2. Alessio J. G. Brown & Johannes Koettl, 2012. "Active Labor Market Programs - Employment Gain or Fiscal Drain?," Kiel Working Papers 1785, Kiel Institute for the World Economy.
  3. Almut Balleer & Britta Gehrke & Wolfgang Lechthaler & Christian Merkl, 2013. "Does Short-Time Work Save Jobs? A Business Cycle Analysis," Kiel Working Papers 1832, Kiel Institute for the World Economy.
  4. Ulf Rinne & Klaus Zimmermann, 2012. "Another economic miracle? The German labor market and the Great Recession," IZA Journal of Labor Policy, Springer, vol. 1(1), pages 1-21, December.
  5. Godøy, Anna & Røed, Knut, 2014. "Unemployment Insurance and Underemployment," IZA Discussion Papers 7913, Institute for the Study of Labor (IZA).
  6. Sandrine Levasseur, 2011. "Labour market adjustments in Estonia during the global crisis," Sciences Po publications 2011-25, Sciences Po.
  7. John Schmitt, 2011. "Labor Market Policy in the Great Recession: Some Lessons from Denmark and Germany," CEPR Reports and Issue Briefs 2011-12, Center for Economic and Policy Research (CEPR).
  8. Münstermann, Leonard & Schneck, Stefan & Wolter, Hans-Jürgen, 2012. "Die Bedeutung des Kurzarbeitergeldes im Mittelstand," IfM-Materialien 215, Institut für Mittelstandsforschung (IfM) Bonn.
  9. Faia, Ester & Lechthaler, Wolfgang & Merkl, Christian, 2013. "Fiscal stimulus and labor market policies in Europe," Journal of Economic Dynamics and Control, Elsevier, vol. 37(3), pages 483-499.
  10. Corbanese, Valli, 2011. "Supporting strategies to recover from the crisis in Croatia, the former Yugoslav Republic of Macedonia and Serbia cross-country report," ILO Working Papers 467146, International Labour Organization.
  11. Krause, Michael U. & Uhlig, Harald, 2012. "Transitions in the German labor market: Structure and crisis," Journal of Monetary Economics, Elsevier, vol. 59(1), pages 64-79.
  12. Hijzen, Alexander & Martin, Sébastien, 2013. "The Role of Short-Time Work Schemes during the Global Financial Crisis and Early Recovery: A Cross-Country Analysis," IZA Discussion Papers 7291, Institute for the Study of Labor (IZA).
  13. Olivier Bargain & Herwig Immervoll & Andreas Peichl & Sebastian Siegloch, 2012. "Distributional consequences of labor-demand shocks: the 2008–2009 recession in Germany," International Tax and Public Finance, Springer, vol. 19(1), pages 118-138, February.
  14. Alexander Hijzen & Sebastien Martin, 2013. "The role of short-time work schemes during the global financial crisis1 and early recovery: a cross-country analysis," IZA Journal of Labor Policy, Springer, vol. 2(1), pages 1-31, December.
  15. Olivier Bargain & Herwig Immervoll & Andreas Peichl & Sebastian Siegloch, 2011. "Distributional Consequences of Labor-demand Shocks: The 2008-09 Recession in Germany," CESifo Working Paper Series 3403, CESifo Group Munich.
  16. Carlos Gradín & Olga Cantó & Coral del Río, 2012. "Unemployment and Spell Duration during the Great Recession in the EU," Working Papers 1205, Universidade de Vigo, Departamento de Economía Aplicada.
  17. Merkl, Christian & Balleer, Almut & Gehrke, Britta & Lechthaler, Wolfgang, 2013. "Does Short-Time Work Save Jobs?," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79718, Verein für Socialpolitik / German Economic Association.
  18. Gonthier, Pauline, 2012. "Why Was Short-Time Work Unattractive During the Crisis?," Institute for Research on Labor and Employment, Working Paper Series qt5dn0w9b1, Institute of Industrial Relations, UC Berkeley.

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