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When Short-Time Work Works

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  • Pierre Cahuc
  • Francis Kramarz
  • Sandra Nevoux

Abstract

Short-time work programs were revived by the Great Recession. To understand their operating mechanisms, we first provide a model showing that short-time work may save jobs in firms hit by strong negative revenue shocks, but not in less severely-hit firms, where hours worked are reduced, without saving jobs. The cost of saving jobs is low because short-time work targets those at risk of being destroyed. Using extremely detailed data on the administration of the program covering the universe of French establishments, we devise a causal identification strategy based on the geography of the program that demonstrates that short-time work saved jobs in firms faced with large drops in their revenues during the Great Recession, in particular when highly levered, but only in these firms. The measured cost per saved job is shown to be very low relative to that of other employment policies.

Suggested Citation

  • Pierre Cahuc & Francis Kramarz & Sandra Nevoux, 2018. "When Short-Time Work Works," Working papers 692, Banque de France.
  • Handle: RePEc:bfr:banfra:692
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    1. Brey, Björn & Hertweck, Matthias S., 2020. "The Extension Of Short-Time Work Schemes During The Great Recession: A Story Of Success?," Macroeconomic Dynamics, Cambridge University Press, vol. 24(2), pages 360-402, March.
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    1. When Short-Time Work Works
      by maximorossi in NEP-LTV blog on 2019-04-10 14:07:14

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    Cited by:

    1. Birinci, Serdar & Karahan, Fatih & Mercan, Yusuf & See, Kurt, 2021. "Labor market policies during an epidemic," Journal of Public Economics, Elsevier, vol. 194(C).
    2. Sandra NEVOUX, 2019. "Short-time work is an efficient job-saving policy [L’activité partielle constitue une politique efficace de sauvegarde de l’emploi]," Bulletin de la Banque de France, Banque de France, issue 225.
    3. Basso, Gaetano & Boeri, Tito & Caiumi, Alessandro & Paccagnella, Marco, 2020. "The new hazardous jobs and worker reallocation," CEPR Discussion Papers 15100, C.E.P.R. Discussion Papers.
    4. Bäurle, Gregor & Lein, Sarah M. & Steiner, Elizabeth, 2021. "Employment adjustment and financial tightness – Evidence from firm-level data," Journal of International Money and Finance, Elsevier, vol. 115(C).
    5. Werner Eichhorst & Ulf Rinne & Hubertus Heil & Martin Brudermüller & Almut Balleer & Britta Gehrke & Brigitte Hochmuth & Christian Merkl & Ulrich Kater & Felix Pakleppa & Sebastian Link & Timo Wollmer, 2019. "Konjunkturelle Eintrübung und sinkende Produktion in der Industrie: Was können Unternehmen und Politik tun?," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 72(18), pages 03-23, September.
    6. Kolasa, Marcin & Rubaszek, Michał & Walerych, Małgorzata, 2021. "Do flexible working hours amplify or stabilize unemployment fluctuations?," European Economic Review, Elsevier, vol. 131(C).
    7. Adams-Prassl, Abi & Boneva, Teodora & Golin, Marta & Rauh, Christopher, 2020. "Inequality in the impact of the coronavirus shock: Evidence from real time surveys," Journal of Public Economics, Elsevier, vol. 189(C).
    8. Dörr, Julian Oliver & Murmann, Simona & Licht, Georg, 2021. "The COVID-19 insolvency gap: First-round effects of policy responses on SMEs," ZEW Discussion Papers 21-018, ZEW - Leibniz Centre for European Economic Research.
    9. Tomaz Cajner & Andrew Figura & Brendan M. Price & David Ratner & Alison E. Weingarden, 2020. "Reconciling Unemployment Claims with Job Losses in the First Months of the COVID-19 Crisis," Finance and Economics Discussion Series 2020-055, Board of Governors of the Federal Reserve System (U.S.).
    10. Michael Siegenthaler & Daniel Kopp, 2019. "Short-Time Work and Unemployment in and after the Great Recession," KOF Working papers 19-462, KOF Swiss Economic Institute, ETH Zurich.
    11. Martins, Pedro S., 2020. "Employee Training and Firm Performance: Quasi-experimental evidence from the European Social Fund," GLO Discussion Paper Series 488, Global Labor Organization (GLO).
    12. Abi Adams‐Prassl & Teodora Boneva & Marta Golin & Christopher Rauh, 2020. "Furloughing," Fiscal Studies, John Wiley & Sons, vol. 41(3), pages 591-622, September.
    13. Bennedsen, Morten & Larsen, Birthe & Schmutte, Ian & Scur, Daniela, 2020. "Preserving job matches during the COVID-19 pandemic: firm-level evidence on the role of government aid," GLO Discussion Paper Series 588, Global Labor Organization (GLO).
    14. Oana CALAVREZO & Lewis HOUNKPEVI & Florence JOURNEAU & Marie-Hélène NGUYEN, 2020. "L’utilisation de l’activité partielle durant la crise de la Covid-19 : une analyse empirique entre mars et mai 2020," LEO Working Papers / DR LEO 2804, Orleans Economics Laboratory / Laboratoire d'Economie d'Orleans (LEO), University of Orleans.
    15. Kato, Takao & Kodama, Naomi, 2019. "The Consequences of Short-Time Compensation: Evidence from Japan," IZA Discussion Papers 12596, Institute of Labor Economics (IZA).
    16. Francesca Carta & Marta De Philippis, 2021. "The impact of the COVID-19 shock on labour income inequality: evidence from Italy," Questioni di Economia e Finanza (Occasional Papers) 606, Bank of Italy, Economic Research and International Relations Area.
    17. Martins, Pedro S., 2021. "Employee Training and Firm Performance: Evidence from ESF Grant Applications," IZA Discussion Papers 14153, Institute of Labor Economics (IZA).
    18. repec:cep:cverdp:027 is not listed on IDEAS
    19. Ambrocio, Gene & Juselius, Mikael, 2020. "Dealing with the costs of the COVID-19 pandemic – what are the fiscal options?," BoF Economics Review 2/2020, Bank of Finland.
    20. Till von Wachter, 2020. "Lost Generations: Long‐Term Effects of the COVID‐19 Crisis on Job Losers and Labour Market Entrants, and Options for Policy," Fiscal Studies, John Wiley & Sons, vol. 41(3), pages 549-590, September.
    21. Dengler, Thomas & Gehrke, Britta, 2021. "Short-Time Work and Precautionary Savings," IZA Discussion Papers 14329, Institute of Labor Economics (IZA).
    22. Bruno Ducoudre & Pierre Madec, 2020. "Évaluation au 6 mai 2020 de l'impact économique de la pandémie de COVID-19 et des mesures de confinement sur le marché du travail en France," Sciences Po publications info:hdl:2441/4urlmja10p8, Sciences Po.
    23. Giupponi, Giulia & Landais, Camille, 2018. "Subsidizing labor hoarding in recessions: the employment and welfare effects of short time work," LSE Research Online Documents on Economics 91708, London School of Economics and Political Science, LSE Library.
    24. Monica Costa Dias & Robert Joyce & Fabien Postel‐Vinay & Xiaowei Xu, 2020. "The Challenges for Labour Market Policy during the COVID‐19 Pandemic," Fiscal Studies, John Wiley & Sons, vol. 41(2), pages 371-382, June.
    25. Giupponi, Giulia & Landais, Camille, 2018. "Subsidizing Labor Hoarding in Recessions: The Employment & Welfare Effects of Short Time Work," CEPR Discussion Papers 13310, C.E.P.R. Discussion Papers.

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    More about this item

    Keywords

    Short-time work; unemployment; employment.;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings

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