Arbeitspapier

Short-Time Work and Precautionary Savings

In the Covid-19 crisis, most OECD countries use short-time work schemes (subsidized working time reductions) to preserve employment relationships. This paper studies whether short-time work can save jobs through stabilizing aggregate demand in recessions. We build a New Keynesian model with incomplete asset markets and labor market frictions, featuring an endogenous firing as well as a short-time work decision. In recessions, short-time work reduces the unemployment risk of workers, which mitigates their precautionary savings motive and aggregate demand falls by less. Using a quantitative model analysis, we show that this channel can increase the stabilization potential of short-time work over the business cycle up to 55%, even more when monetary policy is constrained by the zero lower bound. Further, an increase of the short-time work replacement rate can be more effective compared to an increase of the unemployment benefit replacement rate.

Sprache
Englisch

Erschienen in
Series: IZA Discussion Papers ; No. 14329

Klassifikation
Wirtschaft
Macroeconomics: Consumption; Saving; Wealth
Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
Business Fluctuations; Cycles
Monetary Policy
Fiscal Policy
Labor Turnover; Vacancies; Layoffs
Thema
short-time work
fiscal policy
incomplete asset markets
unemployment risk
matching frictions

Ereignis
Geistige Schöpfung
(wer)
Dengler, Thomas
Gehrke, Britta
Ereignis
Veröffentlichung
(wer)
Institute of Labor Economics (IZA)
(wo)
Bonn
(wann)
2021

Handle
Letzte Aktualisierung
20.09.2024, 08:22 MESZ

Datenpartner

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Objekttyp

  • Arbeitspapier

Beteiligte

  • Dengler, Thomas
  • Gehrke, Britta
  • Institute of Labor Economics (IZA)

Entstanden

  • 2021

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