Arbeitspapier

Counteracting Unemployment in Crises: Non-Linear Effects of Short-Time Work Policy

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Short-time work is a labor market policy that subsidizes working time reductions among firms in financial difficulty to prevent layoffs. Many OECD countries have used this policy in the Great Recession. This paper shows that the effects of short-time work are strongly time dependent and non-linear over the business cycle. It may save up to 0.8 jobs per short-time worker in deep economic crises. The policy becomes more efficient as the recession deepens. In expansions, the effects are smaller and may turn negative. We disentangle discretionary short-time work from automatic stabilization in German data using smooth transition VARs.

Language
Englisch

Bibliographic citation
Series: IZA Discussion Papers ; No. 11472

Classification
Wirtschaft
Multiple or Simultaneous Equation Models: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
Business Fluctuations; Cycles
Fiscal Policy
Subject
short-time work
fiscal policy
labor market
non-linearity
smooth transition VARs
business cycle

Event
Geistige Schöpfung
(who)
Gehrke, Britta
Hochmuth, Brigitte
Event
Veröffentlichung
(who)
Institute of Labor Economics (IZA)
(where)
Bonn
(when)
2018

Handle
Last update
10.03.2025, 11:44 AM CET

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Object type

  • Arbeitspapier

Associated

  • Gehrke, Britta
  • Hochmuth, Brigitte
  • Institute of Labor Economics (IZA)

Time of origin

  • 2018

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