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The Employment and Output Effects of Short-Time Work in Germany

Russell Cooper, Moritz Meyer and Immo Schott

No 23688, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We study the employment and output effects of the short-time work (STW) policy in Germany between 2009 and 2010. This intervention facilitated reductions in hours worked per employee with the goal of preventing layoffs. Using confidential German micro-level data we estimate a search model with heterogeneous multi-worker firms as a basis for policy analysis. Our findings suggest that STW can prevent increases in unemployment during a recession. However, the policy leads to a decrease in the allocative efficiency of the labor market, resulting in significant output losses. These effects arise from a reduction in the vacancy filling rate resulting from the policy intervention.

JEL-codes: E24 E32 E65 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-eur, nep-ias, nep-lab and nep-mac
Date: 2017-08
Note: EFG
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