The Employment and Productivity Effects of Short-Time Work in Germany
52 Pages Posted: 8 Sep 2016
Date Written: September 6, 2016
We study the employment and productivity effects of short-time work (STW) in Germany between 2009 and 2010. The policy 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. Our findings suggest that STW was successful in preventing an increase in unemployment. However, the policy has led to a decrease in the allocative efficiency of the German labor market resulting in significant output losses and a large fiscal burden for the government.
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