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Heterogeneous Layoff Effects of the US Short-Time Compensation Program

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  • Tracey, Marlon R.

    (Southern Illinois University Edwardsville)

  • Polachek, Solomon

    (Binghamton University, New York)

Abstract

The Short-Time Compensation (STC) program enables US firms to reduce work hours via pro-rated Unemployment Insurance (UI) benefits, rather than relying on layoffs as a cost-cutting tool. Despite the program's potential to preclude skill loss and rehiring/ retraining costs, firms' participation rates are still very low in response to economic downturns. Using firm-level UI administrative data, we show why by illustrating which type firms benefit from the program and which do not. Semiparametric estimation indicates STC reduces layoff rates for cyclically sensitive firms by about 15%, but has no effect for more cyclically stable firms.

Suggested Citation

  • Tracey, Marlon R. & Polachek, Solomon, 2018. "Heterogeneous Layoff Effects of the US Short-Time Compensation Program," IZA Discussion Papers 11746, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp11746
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    Cited by:

    1. Daniel Kopp & Michael Siegenthaler, 2021. "Short-Time Work and Unemployment in and after the Great Recession [Does Employment Protection Inhibit Labor Market Flexibility? Lessons from Germany, France, and Belgium]," Journal of the European Economic Association, European Economic Association, vol. 19(4), pages 2283-2321.
    2. Natalia Bermudez & Muriel Dejemeppe & Giulia Tarullo, 2023. "Theory and Empirics of Short-Time Work: A Review," LIDAM Discussion Papers IRES 2023018, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).

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    More about this item

    Keywords

    inverse probability weighting; layoffs; short-time compensation; heterogeneity; finite mixture model;
    All these keywords.

    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • C38 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Classification Methdos; Cluster Analysis; Principal Components; Factor Analysis
    • 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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