Kiel Working Papers, Kiel Institute for World Economics
No 1832:
Does Short-Time Work Save Jobs? A Business Cycle Analysis
Almut Balleer, Britta Gehrke, Wolfgang Lechthaler and Christian Merkl
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; (follow links to similar papers)
JEL-Codes: E24,; E32,; E62,; J08,; J63; (follow links to similar papers)
34 pages, February 2013
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