Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/336465 
Year of Publication: 
2025
Series/Report no.: 
NBB Working Paper No. 481
Publisher: 
National Bank of Belgium, Brussels
Abstract: 
We evaluate the effectiveness of Belgium's short-time work (STW) program during the Great Recession, a period when the country recorded the highest STW take-up rate in Europe. STW allows firms to reduce working hours in response to temporary shocks while avoiding layoffs, playing a key role in European labor market insurance systems. Using an instrumental variable strategy that exploits quasi-exogenous variation stemming from an institutional feature of the Belgian program, we estimate the causal effects of STW on employment and wages. We find that, while STW significantly reduces the volume of work per worker, it does not lead to statistically significant employment gains for the average treated firm. Importantly, positive employment effects are concentrated among small manufacturing firms, which are more likely to face binding liquidity constraints. These findings highlight the importance of targeting and screening in improving the cost-effectiveness of STW programs and minimizing deadweight losses.
Subjects: 
Short-time work
employment
wages
unemployment insurance
JEL: 
E24
J22
J23
J63
J65
Document Type: 
Working Paper

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