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The Employment and Output Effects of Short-Time Work in Germany

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  • Russell Cooper
  • Moritz Meyer
  • Immo Schott

Abstract

We study the employment and output effects of the short-time work (STW) policy in Germany between 2009 and 2010. This intervention facilitated reductions in hours worked per employee with the goal of preventing layoffs. Using confidential German micro-level data we estimate a search model with heterogeneous multi-worker firms as a basis for policy analysis. Our findings suggest that STW can prevent increases in unemployment during a recession. However, the policy leads to a decrease in the allocative efficiency of the labor market, resulting in significant output losses. These effects arise from a reduction in the vacancy filling rate resulting from the policy intervention.

Suggested Citation

  • Russell Cooper & Moritz Meyer & Immo Schott, 2017. "The Employment and Output Effects of Short-Time Work in Germany," NBER Working Papers 23688, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:23688
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    References listed on IDEAS

    as
    1. Burdett, Kenneth & Wright, Randall, 1989. "Unemployment Insurance and Short-Time Compensation: The Effects on Layoffs, Hours per Worker, and Wages," Journal of Political Economy, University of Chicago Press, vol. 97(6), pages 1479-1496, December.
    2. Balleer, Almut & Gehrke, Britta & Lechthaler, Wolfgang & Merkl, Christian, 2016. "Does short-time work save jobs? A business cycle analysis," European Economic Review, Elsevier, vol. 84(C), pages 99-122.
    3. Kohlbrecher, Britta & Merkl, Christian & Nordmeier, Daniela, 2016. "Revisiting the matching function," Journal of Economic Dynamics and Control, Elsevier, vol. 69(C), pages 350-374.
    4. Cahuc, Pierre & Carcillo, Stéphane, 2011. "Is Short-time Work a Good Method to Keep Unemployment Down?," CEPR Discussion Papers 8214, C.E.P.R. Discussion Papers.
    5. Kudoh, Noritaka & Sasaki, Masaru, 2011. "Employment and hours of work," European Economic Review, Elsevier, vol. 55(2), pages 176-192, February.
    6. Russell W. Cooper & Immo Schott, 2013. "Capital Reallocation and Aggregate Productivity," NBER Working Papers 19715, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Helge Braun & Björn Brügemann, 2014. "Welfare Effects of Short-Time Compensation," CESifo Working Paper Series 5063, CESifo Group Munich.
    2. Cahuc, Pierre & Nevoux, Sandra, 2017. "Inefficient Short-Time Work," IZA Discussion Papers 11010, Institute for the Study of Labor (IZA).
    3. Naudé, Wim & Nagler, Paula, 2017. "Technological Innovation and Inclusive Growth in Germany," IZA Discussion Papers 11194, Institute for the Study of Labor (IZA).
    4. Wim Naudé & Paula Nagler, 2018. "Technological Innovation, Entrepreneurship and Productivity in Germany, 1871-2015," SPRU Working Paper Series 2018-02, SPRU - Science and Technology Policy Research, University of Sussex.
    5. Gehrke, Britta & Hochmuth, Brigitte, 2017. "Counteracting unemployment in crises : non-linear effects of short-time work policy," IAB Discussion Paper 201727, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].

    More about this item

    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
    • E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes

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