Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/106537
Authors: 
Braun, Helge
Brügemann, Björn
Year of Publication: 
2014
Series/Report no.: 
IZA Discussion Papers 8597
Abstract: 
We study welfare effects of public short-time compensation (STC) in a model in which firms respond to idiosyncratic profitability shocks by adjusting employment and hours per worker. Introducing STC substantially improves welfare by mitigating distortions caused by public unemployment insurance (UI), but only if firms have access to private insurance. Otherwise firms respond to low profitability by combining layoffs with long hours for remaining workers, rather than by taking up STC. Optimal STC is substantially less generous than UI even when firms have access to private insurance, and equally generous STC is worse than not offering STC at all.
Subjects: 
short-time compensation
unemployment insurance
welfare
JEL: 
J65
Document Type: 
Working Paper

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