Working Paper

Does Short-Time Work Save Jobs? A Business Cycle Analysis

Authors

  • Balleer
  • A.
  • Gehrke
  • B.
  • Lechthaler
  • W.
  • Merkl
  • C.
Publication Date

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.

Info

JEL Classification
E24, E32, E62, J08, J63

Key Words

  • Business cycles
  • fiscal policy
  • search-and-matching
  • short-time work
  • SVAR