 Softening the blow: Job retention schemes in the pandemicJolan Mohimont, Maite de Sola Perea and Marie-Denise Zachary Journal of Public Economics, 2024, vol. 238, issue C Abstract: We evaluate the welfare effects of the temporary job retention schemes (JRS) implemented in response to the COVID-19 pandemic in a DSGE model with incomplete insurance and heterogeneous agents calibrated to the euro area. JRS have large favorable welfare effects and benefit all households when they are well targeted at potentially viable jobs at risk of being lost. These gains are particularly strong for liquid-asset-poor households, especially for those that are also unemployed or on furlough. The job protection component of JRS explains almost all the welfare gains they deliver, while their high level of generosity plays a minor role and has ambiguous net aggregate welfare effects. We also discuss the conditions that make JRS valuable and show that they can cause a decrease in welfare when they subsidize too many safe jobs; when they are targeted at non-viable jobs that will inevitably be lost once schemes end; and when implemented in economies where labor market frictions are low. Keywords: COVID-19; Job retention schemes; Furlough; Household inequality; Idiosyncratic risks; Labor markets; Welfare cost; DSGE (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:pubeco:v:238:y:2024:i:c:s0047272724001348 DOI: 10.1016/j.jpubeco.2024.105198 Access Statistics for this article Journal of Public Economics is currently edited by R. Boadway and J. Poterba More articles in Journal of Public Economics from Elsevier |
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