Furloughs, Human Capital, and Productivity: Evidence from Government Shutdowns

81 Pages Posted: 14 Nov 2021 Last revised: 17 Apr 2025

See all articles by Christoph Herpfer

Christoph Herpfer

University of Virginia, Darden School

Gonzalo Maturana

Emory University - Goizueta Business School

Andrew Teodorescu

Stanford Graduate School of Business

Date Written: April 16, 2025

Abstract

We study how furloughs affect human capital retention and organizational productivity. Exploiting a government shutdown as a natural experiment, we show that federal employees impacted by shutdown-mandated furloughs are 31% more likely to leave their jobs within one year. Younger employees with better outside opportunities are more likely to quit, while older employees with vested pensions are more likely to retire. Consistent with a loss of valuable employees, accounting and legal processes and patenting deteriorate, leading to financial losses. Bureaus forced to implement the furloughs subsequently outsource activities to contractors, and survey data links furloughs to decreases in employee morale. 

Keywords: furloughs, financial distress, government shutdowns, human capital, productivity

JEL Classification: J21, J24, J45, J63

Suggested Citation

Herpfer, Christoph and Maturana, Gonzalo and Teodorescu, Andrew, Furloughs, Human Capital, and Productivity: Evidence from Government Shutdowns (April 16, 2025). Available at SSRN: https://ssrn.com/abstract=3962279 or http://dx.doi.org/10.2139/ssrn.3962279

Christoph Herpfer (Contact Author)

University of Virginia, Darden School ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States

Gonzalo Maturana

Emory University - Goizueta Business School ( email )

1300 Clifton Road
Atlanta, GA 30322-2722
United States

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

Andrew Teodorescu

Stanford Graduate School of Business ( email )

655 Knight Way
Stanford, 94305
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
343
Abstract Views
1,949
Rank
190,073
PlumX Metrics