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
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Englisch
- Erschienen in
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Series: IZA Discussion Papers ; No. 14329
- Klassifikation
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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
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short-time work
fiscal policy
incomplete asset markets
unemployment risk
matching frictions
- Ereignis
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Geistige Schöpfung
- (wer)
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Dengler, Thomas
Gehrke, Britta
- Ereignis
-
Veröffentlichung
- (wer)
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Institute of Labor Economics (IZA)
- (wo)
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Bonn
- (wann)
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2021
- Handle
- Letzte Aktualisierung
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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