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

No 11472, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: 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.

Keywords: smooth transition VARs; non-linearity; labor market; fiscal policy; short-time work; business cycle (search for similar items in EconPapers)
JEL-codes: C32 E24 E32 E62 (search for similar items in EconPapers)
Pages: 52 pages
Date: 2018-04
New Economics Papers: this item is included in nep-eur, nep-lab and nep-mac
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Citations: View citations in EconPapers (8)

Published - published in: Scandinavian Journal of Economics, 2021, 123(1), 144-183

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https://docs.iza.org/dp11472.pdf (application/pdf)

Related works:
Journal Article: Counteracting Unemployment in Crises: Non‐Linear Effects of Short‐Time Work Policy (2021)
Working Paper: Counteracting unemployment in crises: non-linear effects of short-time work policy (2017)
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