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

42 Pages Posted: 6 Jul 2013

See all articles by Almut Balleer

Almut Balleer

Stockholm University - Institute for International Economic Studies (IIES)

Britta Gehrke

Free University of Berlin (FUB) - School of Business & Economics; Government of the Federal Republic of Germany - Institute for Employment Research (IAB); IZA Institute of Labor Economics

Wolfgang Lechthaler

Institute for the World Economy

Christian Merkl

University of Erlangen-Nuremberg-Friedrich Alexander Universität Erlangen Nürnberg; IZA Institute of Labor Economics

Abstract

In the Great Recession most OECD countries used short-time work (publicly subsidized working time reductions) to counteract a steep increase in unemployment. We show that short-time work can actually save jobs. However, there is an important distinction to be made: While the rule-based component of short-time work is a cost-efficient job saver, the discretionary component appears to be completely ineffective. In a case study for Germany, we use the rich data available to combine micro- and macroeconomic evidence with macroeconomic modeling in order to identify, quantify and interpret these two components of short-time work.

Keywords: short-time work, fiscal policy, business cycles, search-and-matching, SVAR

JEL Classification: E24, E32, E62, J08, J63

Suggested Citation

Balleer, Almut and Gehrke, Britta and Lechthaler, Wolfgang and Merkl, Christian, Does Short-Time Work Save Jobs? A Business Cycle Analysis. IZA Discussion Paper No. 7475, Available at SSRN: https://ssrn.com/abstract=2290473 or http://dx.doi.org/10.2139/ssrn.2290473

Almut Balleer (Contact Author)

Stockholm University - Institute for International Economic Studies (IIES) ( email )

Stockholm, SE-10691
Sweden

Britta Gehrke

Free University of Berlin (FUB) - School of Business & Economics ( email )

Germany

Government of the Federal Republic of Germany - Institute for Employment Research (IAB)

Regensburger Str. 104
Nuremberg, 90478
Germany

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Wolfgang Lechthaler

Institute for the World Economy ( email )

Düsternbrooker Weg 120
Kiel, D-24105
Germany

HOME PAGE: http://www.ifw-kiel.de/kiel-institute-for-the-world-economy/view?set_language=en

Christian Merkl

University of Erlangen-Nuremberg-Friedrich Alexander Universität Erlangen Nürnberg

Schloßplatz 4
Erlangen, DE Bavaria 91054
Germany

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

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