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Inefficient Short-Time Work

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  • Pierre Cahuc
  • Sandra Nevoux

Abstract

This paper shows that the reforms which expanded short-time work in France after the great 2008-2009 recession were largely to the benefit of large firms which are recurrent short-time work users. We argue that this expansion of short-time work is an inefficient way to provide insurance to workers, as it entails cross-subsidies which reduce aggregate production. An efficient policy should provide unemployment insurance benefits funded by experience rated employers’ contributions instead of short-time work benefits. We find that short-time work entails significant production losses compared to an unemployment insurance scheme with experience rating.

Suggested Citation

  • Pierre Cahuc & Sandra Nevoux, 2018. "Inefficient Short-Time Work," Working papers 693, Banque de France.
  • Handle: RePEc:bfr:banfra:693
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    References listed on IDEAS

    as
    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.
    2. Olivier J. Blanchard & Jean Tirole, 2008. "The Joint Design of Unemployment Insurance and Employment Protection: A First Pass," Journal of the European Economic Association, MIT Press, vol. 6(1), pages 45-77, March.
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    15. Oana Calavrezo & François Lodin, 2012. "Short-Time Working Arrangements in France During the Crisis: An Empirical Analysis of Firms and Employees," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 54(2), pages 299-320, June.
    16. Lutz Bellmann & Hans-Dieter Gerner, 2011. "Reversed Roles? Wage and Employment Effects of the Current Crisis," Research in Labor Economics, in: Herwig Immervoll & Andreas Peichl & Konstantinos Tatsiramos (ed.), Who Loses in the Downturn? Economic Crisis, Employment and Income Distribution, volume 32, pages 181-206, Emerald Publishing Ltd.
    17. Pasquale Commendatore & Saime Kayam & Ingrid Kubin (ed.), 2015. "Complexity and Geographical Economics," Dynamic Modeling and Econometrics in Economics and Finance, Springer, edition 127, number 978-3-319-12805-4, June.
    18. 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;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 2(1), pages 1-31, December.
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Inefficient Short-Time Work
      by maximorossi in NEP-LTV blog on 2019-04-10 14:10:59
    2. Inefficient Short-Time Work
      by maximorossi in NEP-LTV blog on 2017-11-24 00:30:42

    Citations

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    Cited by:

    1. Pierre Cahuc, 2018. "Wage Insurance, Part-Time Unemployment Insurance and Short-Time Work in the XXI Century," Working Papers hal-03393111, HAL.
    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. Reamonn Lydon & Thomas Y. Mathä & Stephen Millard, 2019. "Short-time work in the Great Recession: firm-level evidence from 20 EU countries," IZA Journal of Labor Policy, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 8(1), pages 1-29, December.
    4. J. Ignacio Conde-Ruiz & Manu García & Luis A. Puch & Jesús Ruiz, 2019. "Calendar effects in daily aggregate employment creation and destruction in Spain," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 10(1), pages 25-63, March.
    5. Pierre Cahuc, 2018. "Wage Insurance, Part-Time Unemployment Insurance and Short-Time Work in the XXI Century," Sciences Po publications 12045, Sciences Po.
    6. Florentino Felgueroso & Marcel Jansen, 2020. "Una valoraciónde los ERTEpara hacer frente a la crisis del COVID-19 en basea la evidencia empírica y desde una perspectiva comparada," Policy Papers 2020-06, FEDEA.
    7. Volker Meier, 2018. "Short-time Work Subsidies in a Matching Model," CESifo Working Paper Series 7281, CESifo.

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    More about this item

    Keywords

    Short-time work; unemployment insurance; experience rating.;
    All these keywords.

    JEL classification:

    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings

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