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Welfare Effects of Short-Time Compensation

Author

Listed:
  • Helge Braun

    (Ruhr Graduate School in Economics, Germany)

  • Björn Brügemann

    (VU Amsterdam, The Netherlands)

Abstract
We study welfare effects of public short-time compensation (STC) in a model in which firms respond to idiosyncratic profitability shocks by adjusting employment and hours per worker. Introducing STC substantially improves welfare by mitigating distortions caused by public unemployment insurance (UI), but only if firms have access to private insurance. Otherwise firms respond to low profitability by combining layoffs with long hours for remaining workers, rather than by taking up STC. Optimal STC is substantially less generous than UI even when firms have access to private insurance, and equally generous STC is worse than not offering STC at all.

Suggested Citation

  • Helge Braun & Björn Brügemann, 2017. "Welfare Effects of Short-Time Compensation," Tinbergen Institute Discussion Papers 17-010/VI, Tinbergen Institute.
    • Handle: RePEc:tin:wpaper:20170010
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    References listed on IDEAS

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    Cited by:

    1. Russell Cooper, 2017. "The Employment and Output Effects of Short-Time Work in Germany," 2017 Meeting Papers 613, Society for Economic Dynamics.
    2. repec:hal:wpspec:info:hdl:2441/6596a4s9af8lt872jnqvm5jg73 is not listed on IDEAS
    3. Cahuc, Pierre & Kramarz, Francis & Nevoux, Sandra, 2021. "The Heterogeneous Impact of Short-Time Work: From Saved Jobs to Windfall Effects," CEPR Discussion Papers 16168, C.E.P.R. Discussion Papers.
    4. Balleer, Almut & Gehrke, Britta & Lechthaler, Wolfgang & Merkl, Christian, 2016. "Does short-time work save jobs? A business cycle analysis," European Economic Review, Elsevier, vol. 84(C), pages 99-122.
    5. Sandra NEVOUX, 2019. "Short-time work is an efficient job-saving policy [L’activité partielle constitue une politique efficace de sauvegarde de l’emploi]," Bulletin de la Banque de France, Banque de France, issue 225.
    6. Pierre Cahuc & Francis Kramarz & Sandra Nevoux, 2021. "The Heterogeneous Impact of Short-Time Work: From Saved Jobs to Windfall Effects," SciencePo Working papers hal-03602410, HAL.
    7. Pierre Cahuc & Francis Kramarz & Sandra Nevoux, 2018. "When Short-Time Work Works," SciencePo Working papers hal-03393127, HAL.
    8. Julien Albertini & Xavier Fairise & Arthur Poirier & Anthony Terriau, 2022. "Short-Time Work Policies During the Covid-19 Pandemic," Annals of Economics and Statistics, GENES, issue 146, pages 123-172.
    9. repec:hal:wpspec:info:hdl:2441/2ju03cb3kc9a3986bsibii70hd is not listed on IDEAS
    10. Britta Gehrke & Brigitte Hochmuth, 2021. "Counteracting Unemployment in Crises: Non‐Linear Effects of Short‐Time Work Policy," Scandinavian Journal of Economics, Wiley Blackwell, vol. 123(1), pages 144-183, January.
    11. Daniel Borowczyk-Martins & Etienne Lalé, 2018. "The welfare effects of involuntary part-time work," Oxford Economic Papers, Oxford University Press, vol. 70(1), pages 183-205.
    12. repec:hal:spmain:info:hdl:2441/2ju03cb3kc9a3986bsibii70hd is not listed on IDEAS
    13. repec:hal:spmain:info:hdl:2441/4f4eu80n0h8r28g6dadlk02mtb is not listed on IDEAS
    14. repec:spo:wpmain:info:hdl:2441/4f4eu80n0h8r28g6dadlk02mtb is not listed on IDEAS
    15. Nathan Vieira, 2022. "The role of the financial constraint in STW policy success during and after the Great Recession," French Stata Users' Group Meetings 2022 13, Stata Users Group.
    16. Julian Teichgräber & Simon Žužek & Jannik Hensel, 2022. "Optimal short-time work: screening for jobs at risk," ECON - Working Papers 402, Department of Economics - University of Zurich.
    17. repec:spo:wpmain:info:hdl:2441/2ju03cb3kc9a3986bsibii70hd is not listed on IDEAS
    18. repec:spo:wpecon:info:hdl:2441/4f4eu80n0h8r28g6dadlk02mtb is not listed on IDEAS
    19. Brey, Björn & Hertweck, Matthias S., 2020. "The Extension Of Short-Time Work Schemes During The Great Recession: A Story Of Success?," Macroeconomic Dynamics, Cambridge University Press, vol. 24(2), pages 360-402, March.
    20. Tito Boeri & Pierre Cahuc, 2022. "Labor Market Insurance Policies in the XXI Century," SciencePo Working papers Main hal-03878719, HAL.
    21. repec:spo:wpmain:info:hdl:2441/6596a4s9af8lt872jnqvm5jg73 is not listed on IDEAS
    22. repec:hal:spmain:info:hdl:2441/6596a4s9af8lt872jnqvm5jg73 is not listed on IDEAS
    23. repec:spo:wpecon:info:hdl:2441/2ju03cb3kc9a3986bsibii70hd is not listed on IDEAS
    24. repec:spo:wpecon:info:hdl:2441/6596a4s9af8lt872jnqvm5jg73 is not listed on IDEAS
    25. repec:hal:wpspec:info:hdl:2441/4f4eu80n0h8r28g6dadlk02mtb is not listed on IDEAS

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    More about this item

    Keywords

    Short-Time Compensation; Unemployment Insurance; Welfare;
    All these keywords.

    JEL classification:

    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings

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