Inefficient Short-Time Work

34 Pages Posted: 11 Sep 2017

See all articles by Pierre Cahuc

Pierre Cahuc

Ecole Polytechnique, Paris

Sandra Nevoux

CREST-ENSAE

Date Written: September 2017

Abstract

This paper shows that the reforms which expanded short-time work in France after the great 2008-2009 recession were largely to the benefit of large firms which are recurrent short-time work users. We argue that this expansion of short-time work is an inefficient way to provide insurance to workers, as it entails cross-subsidies which reduce aggregate production. An efficient policy should provide unemployment insurance benefits funded by experience rated employers' contributions instead of short-time work benefits. We find that short-time work entails significant production losses compared to an unemployment insurance scheme with experience rating.

Keywords: experience rating, Short-time work, Unemployment insurance

JEL Classification: J63, J65

Suggested Citation

Cahuc, Pierre and Nevoux, Sandra, Inefficient Short-Time Work (September 2017). CEPR Discussion Paper No. DP12269, Available at SSRN: https://ssrn.com/abstract=3035263

Pierre Cahuc (Contact Author)

Ecole Polytechnique, Paris ( email )

1 rue Descartes
Paris, 75005
France

Sandra Nevoux

CREST-ENSAE ( email )

5 Rue Henry Le Chatelier
PALAISEAU, 91120
France
0033 (0)6 77 25 96 83 (Phone)

HOME PAGE: http://www.sandranevoux.com

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