The employment and output effects of short-time work in Germany

Author / Creator

Cooper, Russell W., 1955- author

Available as

Online

Summary

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 ...

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.

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