Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/207421 
Year of Publication: 
2019
Series/Report no.: 
IZA Discussion Papers No. 12596
Publisher: 
Institute of Labor Economics (IZA), Bonn
Abstract: 
There is a growing body of evidence on the efficacy of Short-Time Compensation (STC), a subsidy to promote worksharing in a recession, in achieving its intended goal of curtailing layoffs and preventing a sharp rise in unemployment. However, very little is known about the consequences of STC for firm performance. We apply the Propensity Score Matching (PSM) with difference-in-differences methodology to unique data from Japan, a country known for its extensive use, and find that STC results in improved profitability. The improved profitability is further found to be achieved through sales growth without raising labor costs. We explore possible mechanisms behind the observed positive consequences of STC for sales and profits. Additional evidence tends to favor what the psychology literature calls "shared adversity"- worksharing promoted by STC facilitates supportive interactions among workers in the firm and strengthens commitment of workers to the firm, and thereby enhances goal alignment between workers and the firm as well as between coworkers. Such workers are more open to the firm's effort to increase sales/revenues without raising cost.
Subjects: 
short-time work
short-time compensation
worksharing
employment adjustment
firm performance
JEL: 
J23
J65
J68
H25
Document Type: 
Working Paper

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