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Does short-time work save jobs? A business cycle analysis

Almut Balleer, Britta Gehrke (), Wolfgang Lechthaler and Christian Merkl ()

No 1832, Kiel Working Papers from Kiel Institute for the World Economy (IfW)

Abstract: This paper analyzes the effects of short-time work (i.e., government subsidized working time reductions) on unemployment and output fluctuations. The central question is whether the rule based component (i.e., the existence of the institution short-time work) and the discretionary component (i.e., rule changes) stabilize employment over the business cycle. In our baseline scenario the rule based component stabilizes unemployment fluctuations by 15% and output fluctuations by 7%. Given the small share of short-time work expenses in terms of GDP, the stabilization effects are large compared to other instruments such as the income tax system. By contrast, discretionary short-time work interventions do not have any statistically significant effect on unemployment. These effects are based on a structural VAR estimation which is identified using the output elasticity of short-time work estimated from German establishment paneldata. The model shows that non-effects of discretionary interventions may be due to their low persistence.

Keywords: short-time work; fiscal policy; business cycles; search-and-matching; SVAR (search for similar items in EconPapers)
JEL-codes: E24 E32 E62 J08 J63 (search for similar items in EconPapers)
Date: 2013
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Related works:
Journal Article: Does short-time work save jobs? A business cycle analysis (2016) Downloads
Working Paper: Does Short-Time Work Save Jobs? A Business Cycle Analysis (2014) Downloads
Working Paper: Does Short-Time Work Save Jobs? A Business Cycle Analysis (2013) Downloads
Working Paper: Does Short-Time Work Save Jobs? A Business Cycle Analysis (2013) Downloads
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