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Inefficient Short-Time Work

Author

Listed:
  • Pierre Cahuc

    (Département d'économie)

  • Sandra Nevoux

    (Banque de France)

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, 2019. "Inefficient Short-Time Work," Sciences Po publications 2019-03, Sciences Po.
  • Handle: RePEc:spo:wpmain:info:hdl:2441/68ufmnnh3j9vmblf03huqt18qe
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    File URL: https://spire.sciencespo.fr/hdl:/2441/68ufmnnh3j9vmblf03huqt18qe/resources/2019-cahuc-and-nevoux-inefficient-short-time-work.pdf
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    References listed on IDEAS

    as
    1. Russell Cooper, 2017. "The Employment and Output Effects of Short-Time Work in Germany," 2017 Meeting Papers 613, Society for Economic Dynamics.
    2. repec:aea:jecper:v:31:y:2017:i:3:p:151-74 is not listed on IDEAS
    3. Calavrezo, Oana & Duhautois, Richard & Walkowiak, Emmanuelle, 2010. "Short-Time Compensation and Establishment Exit: An Empirical Analysis with French Data," IZA Discussion Papers 4989, Institute of Labor Economics (IZA).
    4. 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.
    5. Kenneth A. Couch & Douglas J. Besharov & David Neumark, 2013. "Spurring Job Creation in Response to Severe Recessions: Reconsidering Hiring Credits," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 32(1), pages 142-171, January.
    6. Katharine G. Abraham & Susan N. Houseman, 2014. "Short-Time Compensation as a Tool to Mitigate Job Loss? Evidence on the U.S. Experience During the Recent Recession," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 53(4), pages 543-567, October.
    7. Diego Restuccia & Richard Rogerson, 2017. "The Causes and Costs of Misallocation," Journal of Economic Perspectives, American Economic Association, vol. 31(3), pages 151-174, Summer.
    8. 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.
    9. Katharine G. Abraham & Susan N. Houseman, 1994. "Does Employment Protection Inhibit Labor Market Flexibility? Lessons from Germany, France, and Belgium," NBER Chapters,in: Social Protection versus Economic Flexibility: Is There a Trade-Off?, pages 59-94 National Bureau of Economic Research, Inc.
    10. 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.
    11. Hertweck, Matthias Sebastian & Brey, Björn, 2016. "The Extension of Short-time Work Schemes during the Great Recession: A Story of Success?," Annual Conference 2016 (Augsburg): Demographic Change 145795, Verein für Socialpolitik / German Economic Association.
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    More about this item

    Keywords

    Short-time work; Unemployment insurance; Experience rating;

    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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