The effect of preserving job matches during a crisis

Morten Bennedsen, Birthe Larsen, Ian Schmutte and Daniela Scur

Labour Economics, 2023, vol. 84, issue C

Abstract: It is generally difficult to measure the importance of preserving worker-firm relationships, particularly for low-wage jobs that involve general skills. The COVID-19 pandemic led to the sudden and seemingly temporary disruption of millions of otherwise productive employment relationships around the world. Using novel administrative and survey data from Denmark, we study a policy where firms paid up to 25% of wages to furlough instead of firing workers. We find that aid-taking firms furloughed about 24pp more workers, a large share of whom would have otherwise been laid off, and this had a positive impact on subsequent firm survival, employment growth and sales. Further, we find firms derive value from maintaining ties to low-wage and blue collar workers and that preserving those matches is beneficial to firms, suggesting policies that preserve job matches may help speed-up recovery.

Keywords: Employment subsidies; Crisis management (search for similar items in EconPapers)
JEL-codes: H12 H32 H5 J3 J63 M54 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:labeco:v:84:y:2023:i:c:s0927537123000817

DOI: 10.1016/j.labeco.2023.102406

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