Heterogeneous Layoff Effects of the Us Short-Time Compensation Program

32 Pages Posted: 28 Aug 2018

See all articles by Marlon Tracey

Marlon Tracey

Southern Illinois University at Edwardsville

Solomon W. Polachek

State University of New York at Binghamton; National Bureau of Economic Research (NBER); IZA Institute of Labor Economics

Abstract

The Short-Time Compensation (STC) program enables US firms to reduce work hours via pro-rated Unemployment Insurance (UI) benefits, rather than relying on layoffs as a cost-cutting tool. Despite the program's potential to preclude skill loss and rehiring/ retraining costs, firms' participation rates are still very low in response to economic downturns. Using firm-level UI administrative data, we show why by illustrating which type firms benefit from the program and which do not. Semiparametric estimation indicates STC reduces layoff rates for cyclically sensitive firms by about 15%, but has no effect for more cyclically stable firms.

Keywords: short-time compensation, layoffs, inverse probability weighting, heterogeneity, finite mixture model

JEL Classification: C21, C38, J63, J65

Suggested Citation

Tracey, Marlon and Polachek, Solomon W., Heterogeneous Layoff Effects of the Us Short-Time Compensation Program. IZA Discussion Paper No. 11746, Available at SSRN: https://ssrn.com/abstract=3238571

Marlon Tracey (Contact Author)

Southern Illinois University at Edwardsville ( email )

1 Hairpin Drive
Edwardsville, IL 62026-1102
United States

Solomon W. Polachek

State University of New York at Binghamton ( email )

Binghamton, NY 13902-6000
United States
607-777-2144 (Phone)
607-777-4900 (Fax)

National Bureau of Economic Research (NBER) ( email )

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Cambridge, MA 02138
United States

IZA Institute of Labor Economics ( email )

P.O. Box 7240
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