On the Effectiveness of Short-time Work Schemes in Dual Labor Markets

Victoria Osuna and J. García-Pérez ()
Authors registered in the RePEc Author Service: J. Ignacio García Pérez ()

De Economist, 2015, vol. 163, issue 3, 323-351

Abstract: This paper evaluates the effectiveness of short-time work (STW) schemes for preserving jobs and reducing the segmentation between stable and unstable jobs observed in dual labour markets. For this purpose, we develop and simulate an equilibrium search and matching model considering the situation of the Spanish 2012 labour market reform as a benchmark. Our steady-state results show that the availability of STW schemes does not necessarily reduce unemployment and job destruction. The effectiveness of this measure depends on the degree of subsidization of payroll taxes it may entail: with a 33 % subsidy, we find that STW is quite beneficial for the Spanish economy because it reduces both unemployment and labour market segmentation. We also perform a cost-benefit analysis that shows that there is scope for Pareto improvements when STW is subsidized. Again, the STW scenario with a 33 % subsidy on payroll taxes seems the most beneficial because more than 57 % of workers improve. These workers also experience a significant increase in annual income that could be used to compensate the losers from this policy change and the State for the fiscal balance deterioration. This reform saves the highest number of jobs and has the lowest deadweight costs. Copyright Springer Science+Business Media New York 2015

Keywords: Permanent and temporary contracts; Duality; Severance costs; Short-time work; Unemployment; Tenure distribution; Job destruction; J23; J32; J63; J64; J65; J68 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
http://hdl.handle.net/10.1007/s10645-015-9256-x (text/html)
Access to full text is restricted to subscribers.

Related works:
Working Paper: On the effectiveness of short-time work schemes in dual labor markets (2015)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:kap:decono:v:163:y:2015:i:3:p:323-351

Ordering information: This journal article can be ordered from
http://www.springer. ... cs/journal/10645/PS2

DOI: 10.1007/s10645-015-9256-x

Access Statistics for this article

De Economist is currently edited by Rob Alessie, Bas ter Weel, Casper van Ewijk, Jan C. van Ours and Frank de Jong

More articles in De Economist from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().