Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/245466 
Year of Publication: 
2021
Series/Report no.: 
CESifo Working Paper No. 9285
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
We study how furlough affects household financial distress during the COVID-19 pandemic. Furlough increases the probability of late housing and bill payments by 30% and 9%, respectively. The effects exist for individuals who rent their home, but not mortgagees who can mitigate financial distress by reducing expenditure during furlough by deferring mortgage payments though the Mortgage Holiday Scheme. Furloughed individuals significantly reduce expenditure and spend their savings to offset furlough-induced income reductions. This creates wealth inequality but lowers the probability a furloughed worker experiences financial distress after returning to work. Estimates show an 80% government contribution to furloughed workers' wages minimizes the incidence of financial distress at the lowest cost to taxpayers.
Subjects: 
furlough
short-time work
Coronavirus job retention scheme
Covid-19 pandemic
financial distress
automatic stabilizers
inequality
JEL: 
D14
D31
E24
G51
H24
Document Type: 
Working Paper
Appears in Collections:

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.