Reemployment premium effect of furlough programs: evaluating Spain’s scheme during the COVID-19 crisis

J. Garcia-Clemente (), N. Rubino and Emilio Congregado
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J. Garcia-Clemente: University of Huelva
N. Rubino: University of Huelva

Journal for Labour Market Research, 2023, vol. 57, issue 1, 1-15

Abstract: Abstract This paper presents an average treatment effect analysis of Spain’s furlough program during the onset of the COVID-19 pandemic. Using 2020 labour force quarterly microdata, we construct a counterfactual made of comparable nonfurloughed individuals who lost their jobs and apply propensity score matching based on their pretreatment characteristics. Our findings show that the probability of being re-employed in the next quarter significantly increased for the treated (furlough granted group). These results appear robust across models, after testing a wide range of matching specifications that reveal a reemployment probability premium of near 30 percentage points in the group of workers who had been furloughed for a single quarter. Nevertheless, a different time arrangement affected the magnitude of the effect, suggesting that it may decrease with the furlough duration. Thus, an analogous analysis for a longer (two quarter) scheme estimated a still positive but smaller effect, approximately 12 percentage points. Although this finding might alert against long lasting schemes under persistent recessions, this policy still stands as a useful strategy to face essentially transitory adverse shocks.

Keywords: Furlough; Short-time work; ERTE; Propensity score matching; COVID-19; Spain; J08; J38; J65; J68 (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1186/s12651-023-00343-w

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