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Short-time work, its replacement rate and labour mobility

Author

Listed:
  • Gaetano Basso

    (Bank of Italy)

  • Emanuele Ciani

    (Bank of Italy)

  • Francesco Manaresi

    (Bank of Italy)

  • Lorenzo Pesaresi

    (Bank of Italy)

Abstract

This paper studies the impact of the short-time work (STW) replacement rate on workers' job-to-job mobility. Exploiting a discontinuity in the Italian STW benefit schedule and matched employer-employee data, we show that a 10-percentage-point increase in the replacement rate raises the probability of remaining with the current employer by 3 per cent, thereby reducing job-to-job flows. The effect is driven by low-ability workers, who are less likely to move to higher-paying firms, suggesting a deterioration in workforce quality among firms relying on STW. We develop a model to rationalise these results and derive an optimal STW benefit formula. The fiscal externality is positive but smaller than that generated by unemployment benefits.

Suggested Citation

  • Gaetano Basso & Emanuele Ciani & Francesco Manaresi & Lorenzo Pesaresi, 2026. "Short-time work, its replacement rate and labour mobility," Temi di discussione (Economic working papers) 1544, Bank of Italy, Economic Research and International Relations Area.
    • Handle: RePEc:bdi:wptemi:td_1544_26
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    File URL: https://www.bancaditalia.it/pubblicazioni/temi-discussione/2026/2026-1544/en_tema_1544.pdf
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    Keywords

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    JEL classification:

    • J62 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Job, Occupational and Intergenerational Mobility; Promotion
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • J68 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Public Policy

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