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Kurzarbeit and Natural Disasters: How Effective Are Short-Time Working Allowances in Avoiding Unemployment?

Julio G. Fournier Gabela and Luis Sarmiento

No 1909, Discussion Papers of DIW Berlin from DIW Berlin, German Institute for Economic Research

Abstract: There is substantial evidence on the effectiveness of short-time work on reducing unemployment. However, no study looks at its role during natural disasters. This article exploits the exogenous nature of the 2013 European floods to assess if the impact depends on the quality of the short-time work mechanism across affected counties. We use regression discontinuity designs to show that unemployment does not increase in regions with robust programs while rising up to seventeen percent in areas with less robust mechanisms. Our results are relevant to the literature on how institutional quality influences recovery and suggests that short-time work programs are useful against unforeseeable productivity shocks besides financial crises.

Keywords: Flooding; short-time work; regional unemployment; regression discontinuity in time; institutions (search for similar items in EconPapers)
JEL-codes: J68 H84 Q54 C22 (search for similar items in EconPapers)
Pages: 49 p.
Date: 2020
New Economics Papers: this item is included in nep-eur and nep-lab
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