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Title:Short-time work benefits revisited: Some lessons from the Great Recession PDF Logo
Authors:Boeri, Tito
Brücker, Herbert
Issue Date:2011
Series/Report no.:Discussion paper series // Forschungsinstitut zur Zukunft der Arbeit 5635
Abstract:The Great Recession triggered a resurgence of short-time work (STW) throughout the OECD. Several countries introduced from scratch STW or significantly expanded the scope of the programmes already in place. In some countries like Italy, Japan and Germany between 2.5 and 5 per cent of the workforce participated in short-time work schemes at the trough of the recession. In this paper we analyse the rationale for short time work benefits and their effects on labour adjustment from both a cross-country and a time-series perspective. We find that STW actually contributed to reduce job losses during the Great Recession. However, the number of jobs saved, according to our macroeconomic estimates, is smaller than the full-time equivalents jobs involved by these programmes, pointing in some cases to sizeable deadweight costs. Other institutions, like plant-level bargaining over hours, wages and employment levels may be more effective than STW in encouraging adjustment along the intensive margins in presence of temporary shocks. Our results also suggest that STW cannot be readily extended to countries having much different institutional configurations as the demand for STW is very much affected by other institutions such as employment protection legislation and the degree of centralization of collective bargaining. The micro evidence from firm-level data in Germany is more encouraging as to the effectiveness of STW, pointing to rather moderate deadweight losses. We interpret this result as due to specific design features of the German STW that could make it more effective in addressing the moral hazard problems related to reliance on subsidised hour reductions. The German Kurzarbeit scheme is indeed discouraging 100 per cent hours reductions and is experience-rated.
Subjects:intensive margin
short-time
JEL:J63
J65
Persistent Identifier of the first edition:urn:nbn:de:101:1-201104134380
Document Type:Working Paper
Appears in Collections:IZA Discussion Papers, Forschungsinstitut zur Zukunft der Arbeit (IZA)

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