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Short-Time Work Benefits Revisited: Some Lessons from the Great Recession

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  • Boeri, Tito

    ()
    (Bocconi University)

  • Brücker, Herbert

    ()
    (Institute for Employment Research (IAB), Nuremberg)

Abstract

The Great Recession triggered a resurgence of short-time work (STW) throughout the OECD. Several countries introduced from scratch STW or significantly expanded the scope of the programmes already in place. In some countries like Italy, Japan and Germany between 2.5 and 5 per cent of the workforce participated in short-time work schemes at the trough of the recession. In this paper we analyse the rationale for short time work benefits and their effects on labour adjustment from both a cross-country and a time-series perspective. We find that STW actually contributed to reduce job losses during the Great Recession. However, the number of jobs saved, according to our macroeconomic estimates, is smaller than the full-time equivalents jobs involved by these programmes, pointing in some cases to sizeable deadweight costs. Other institutions, like plant-level bargaining over hours, wages and employment levels may be more effective than STW in encouraging adjustment along the intensive margins in presence of temporary shocks. Our results also suggest that STW cannot be readily extended to countries having much different institutional configurations as the demand for STW is very much affected by other institutions such as employment protection legislation and the degree of centralization of collective bargaining. The micro evidence from firm-level data in Germany is more encouraging as to the effectiveness of STW, pointing to rather moderate deadweight losses. We interpret this result as due to specific design features of the German STW that could make it more effective in addressing the moral hazard problems related to reliance on subsidised hour reductions. The German Kurzarbeit scheme is indeed discouraging 100 per cent hours reductions and is experience-rated.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 5635.

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Length: 54 pages
Date of creation: Apr 2011
Date of revision:
Publication status: published in: Economic Policy, 2011, 26 (68), 697-766.
Handle: RePEc:iza:izadps:dp5635

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Keywords: intensive margin; short-time;

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References

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  1. FitzRoy, Felix R & Hart, Robert A, 1985. "Hours, Layoffs and Unemployment Insurance Funding: Theory and Practice in an International Perspective," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 95(379), pages 700-713, September.
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Citations

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Cited by:
  1. Bornhorst, Fabian & Mody, Ashoka, 2012. "Test of the German resilience," CFS Working Paper Series 2012/14, Center for Financial Studies (CFS).
  2. Michael C. Burda & Jennifer Hunt, 2011. "What Explains the German Labor Market Miracle in the Great Recession?," SFB 649 Discussion Papers SFB649DP2011-031, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
  3. Almut Balleer & Britta Gehrke & Wolfgang Lechthaler & Christian Merkl, 2014. "Does Short-Time Work Save Jobs? A Business Cycle Analysis," CESifo Working Paper Series 4640, CESifo Group Munich.
  4. Münstermann, Leonard & Schneck, Stefan & Wolter, Hans-Jürgen, 2012. "Die Bedeutung des Kurzarbeitergeldes im Mittelstand," IfM-Materialien 215, Institut für Mittelstandsforschung (IfM) Bonn.
  5. 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).
  6. Olga Bohachova & Bernhard Boockmann & Claudia M. Buch, 2011. "Labor Demand During the Crisis: What Happened in Germany?," CESifo Working Paper Series 3625, CESifo Group Munich.
  7. Dieter Hundt & Frank-Jürgen Weise & Hagen Lesch & Wolfgang Lechthaler & Christian Merkl, 2012. "Eurokrise, Energiewende, Konjunkturabkühlung: Ende des deutschen Jobwunders?," Ifo Schnelldienst, Ifo Institute for Economic Research at the University of Munich, vol. 65(01), pages 03-13, 01.
  8. Brown, Alessio J. G. & Koettl, Johannes, 2012. "Active Labor Market Programs: Employment Gain or Fiscal Drain?," IZA Discussion Papers 6880, Institute for the Study of Labor (IZA).
  9. Cazes, Sandrine & Verick, Sher & Al Hussami, Fares, 2011. "Diverging trends in unemployment in the United States and Europe : evidence from Okun's law and the global financial crisis," ILO Working Papers, International Labour Organization 467629, International Labour Organization.
  10. Scholz, Theresa, 2012. "Employers' selection behavior during short-time work," IAB Discussion Paper 201218, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
  11. Gonthier, Pauline, 2012. "Why Was Short-Time Work Unattractive During the Crisis?," Institute for Research on Labor and Employment, Working Paper Series, Institute of Industrial Relations, UC Berkeley qt5dn0w9b1, Institute of Industrial Relations, UC Berkeley.
  12. Fabian Bornhorst & Ashoka Mody, 2012. "Tests of German Resilience," IMF Working Papers 12/239, International Monetary Fund.
  13. Kruppe, Thomas & Scholz, Theresa, 2014. "Labour hoarding in Germany : employment effects of short-time work during the crises," IAB Discussion Paper 201417, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].

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