Welfare Effects of Short-Time Compensation

Helge Braun () and Björn Brügemann ()
Additional contact information
Helge Braun: University of Cologne
Björn Brügemann: Vrije Universiteit Amsterdam
Authors registered in the RePEc Author Service: Bjoern A. Bruegemann

No 8597, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: We study welfare effects of public short-time compensation (STC) in a model in which firms respond to idiosyncratic profitability shocks by adjusting employment and hours per worker. Introducing STC substantially improves welfare by mitigating distortions caused by public unemployment insurance (UI), but only if firms have access to private insurance. Otherwise firms respond to low profitability by combining layoffs with long hours for remaining workers, rather than by taking up STC. Optimal STC is substantially less generous than UI even when firms have access to private insurance, and equally generous STC is worse than not offering STC at all.

Keywords: short-time compensation; unemployment insurance; welfare (search for similar items in EconPapers)
JEL-codes: J65 (search for similar items in EconPapers)
Pages: 56 pages
Date: 2014-10
New Economics Papers: this item is included in nep-ias, nep-lab and nep-ltv
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (21)

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Related works:
Working Paper: Welfare Effects of Short-Time Compensation (2017)
Working Paper: Welfare Effects of Short-Time Compensation (2014)
Working Paper: Welfare Effects of Short-Time Compensation (2014)
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