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Germany's Short Time Compensation Program: macroeconom(etr)ic insight


  • Henner Will

    () (Macroeconomic Policy Institute (IMK) in the Hans Boeckler Foundation)


Short Time Compensation [STC] was a key program in Germany to fight the crisis. However, STC is quite an old tool: in the past 100 years it has been used quite often and is very multifunctional. It stabilized employment in every kind of macroeconomic shock. After a brief look into the institutional and quantitative development of STC in Germany, this paper tries to answer the question whether STC prevents Schumpeterian creative destruction and structural change in economic downturns. With the help of a VAR-Model we can analyze interdependencies between the business cycle, STC and unemployment, finding evidence for a bridging function of STC. A closer look at the pro-cyclical average stoppage supports the thesis that most of the enterprises using STC are fundamentally economically healthy, that is, STC does not prevent structural change in downturns.

Suggested Citation

  • Henner Will, 2011. "Germany's Short Time Compensation Program: macroeconom(etr)ic insight," IMK Working Paper 1-2011, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
  • Handle: RePEc:imk:wpaper:1-2011

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    References listed on IDEAS

    1. Herzog-Stein, Alexander & Seifert, Hartmut, 2009. "Deutsches "Beschäftigungswunder" und flexible Arbeitszeiten," WSI Working Papers 169, The Institute of Economic and Social Research (WSI), Hans-Böckler-Foundation.
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    Cited by:

    1. Holtemöller, Oliver & Brautzsch, Hans-Ulrich & Drechsel, Katja & Drygalla, Andrej & Giesen, Sebastian & Hennecke, Peter & Kiesel, Konstantin & Loose, Brigitte & Meier, Carsten-Patrick & Zeddies, Götz, 2015. "Ökonomische Wirksamkeit der Konjunktur stützenden finanzpolitischen Maßnahmen der Jahre 2008 und 2009. Forschungsvorhaben im Auftrag des Bundesministeriums der Finanzen," IWH Online 4/2015, Halle Institute for Economic Research (IWH).

    More about this item


    Short Time Compensation; VAR; Paradox; structural change;

    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
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy
    • N44 - Economic History - - Government, War, Law, International Relations, and Regulation - - - Europe: 1913-

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