Skip to main content


  • Björn Brey (a1) and Matthias S. Hertweck (a2)

This paper evaluates the effectiveness of short-time work (STW) extensions—e.g., relaxing eligibility criteria or implementing new schemes—in OECD countries during the Great Recession. First, we find that the dampening effect of STW on the unemployment rate diminishes at higher take-up rates. Second, only countries with pre-existing STW schemes were able to fully exploit the benefits of STW. Third, the effects of STW were strongest when GDP growth was deeply negative at the beginning of the recession. In summary, our results indicate that STW is most effective when used as a fast-responding automatic stabilizer.

Corresponding author
Address correspondence to: Matthias S. Hertweck, Deutsche Bundesbank, Central Office, Directorate General Economics, Wilhelm-Epstein-Straße 14, 60431 Frankfurt am Main, Germany; e-mail:; website:
Hide All

Without implication, we would like to thank Luna Bellani, Z. Eylem Gevrek, Maarten Buis, Decio Coviello, Matthias Hartmann, Tommy Krieger, Christian Merkl, Sven Resnjanskij, and an anonymous referee, as well as conference participants at SaM Amsterdam, VfS Augsburg, DIW Berlin, ifo Dresden, EEA Geneva, IWH-CIREQ Halle, SMYE Halle, RES-PhD London, IAB Nuremberg, PDC Perth, and seminar audiences at the Bank of England and the University of Konstanz for extensive comments and suggestions. Susanne Fuchs provided excellent editorial assistance. Part of this research project was conducted when both authors were affiliated with the University of Konstanz, financially supported by the Juniorprofessorenprogramm Baden-Württemberg (Project no. P32968412) and the Young Scholar Fund of the University of Konstanz (Project no. P83985812), which is gratefully acknowledged. This paper represents the authors' personal opinions and does not necessarily reflect the views of the Deutsche Bundesbank or the Eurosystem.

Hide All
Allen & Overy (2010) Temporary measures to promote employment in Luxembourg. URL: (last access: February 7, 2018).
Andersen, T. G. and Sorensen, B. E. (1996) GMM estimation of a stochastic volatility model: A Monte Carlo study. Journal of Business & Economic Statistics 14 (3), 328352.
Anderson, T. W. and Hsiao, C. (1982) Formulation and estimation of dynamic models using panel data. Journal of Econometrics 18 (1), 4782.
Arellano, M. and Bond, S. (1991) Some tests of specification for panel data: Monte Carlo evidence and an application to employment equations. Review of Economic Studies 58 (2), 277–97.
Arellano, M. and Bover, O. (1995) Another look at the instrumental variable estimation of error-components models. Journal of Econometrics 68 (1), 2951.
Arpaia, A., Curci, N., Meyermans, E., Peschner, J., and Pierini, F. (2010) Short Time Working Arrangements as Response to Cyclical Fluctuations. European Economy – Occasional papers 64, European Commission, Brussels.
Arranz, J. M., García-Serrano, C., and Hernanz, V. (2018) The changing use of short-time work schemes: Evidence from two recessions. European Journal of Industrial Relations (forthcoming).
Ball, L. M., Leigh, D., and Loungani, P. (2017) Okun's law: Fit at 50? Journal of Money, Credit and Banking 49 (7), 14131441.
Balleer, A., Gehrke, B., Lechthaler, W., and Merkl, C. (2016) Does short-time work save jobs? A business cycle analysis. European Economic Review 84 (C), 99122.
Bellmann, L. and Gerner, H.-D. (2011) Reversed roles? Wage effects of the current crisis. Research in Labor Economics 32, 181206.
Bellmann, L., Gerner, H.-D., and Upward, R. (2015) The response of German establishments to the 2008–2009 economic crisis. In Commendatore, P., Kayam, S., and Kubin, I. (eds.), Complexity and Geographical Economics – Topics and Tools, Dynamic Modeling and Econometrics in Economics and Finance, vol. 19, pp. 165207. Cham, Switzerland: Springer International Publishing.
Berger, T. and Vierke, H. (2017) Estimating the natural rate of hours. Macroeconomic Dynamics 21 (6), 14261453.
Blundell, R. and Bond, S. (1998) Initial conditions and moment restrictions in dynamic panel data models. Journal of Econometrics 87 (1), 115143.
Boeri, T. and Bruecker, H. (2011) Short-time work benefits revisited: Some lessons from the Great Recession. Economic Policy 26 (68), 697765.
Boeri, T. and van Ours, J. (2013) The Economics of Imperfect Labor Markets, 2nd ed. Princeton, NJ: Princeton University Press.
Bowsher, C. (2002) On testing overidentifying restrictions in dynamic panel data models. Economic Letters 77, 211220.
Braun, H. and Brügemann, B. (2017) Welfare Effects of Short-Time Compensation. Discussion paper 17-010/VI, Tinbergen Institute.
Breitung, J. (2000) The local power of some unit root tests for panel data. In Nonstationary Panels, Panel Cointegration, and Dynamic Panels, Advances in Econometrics, vol. 15, pp. 161178. Amsterdam: JAI Press.
Cahuc, P. and Carcillo, S. (2011) Is short-time work a good method to keep unemployment down? Nordic Economic Policy Review 1, 133164.
Cahuc, P. and Nevoux, S. (2017) Inefficient Short-Time Work. Discussion paper 12269, Centre for Economic Policy Research.
Calavrezo, O., Duhautois, R., and Walkowiak, E. (2010) Short-time compensation and establishment exit: An empirical analysis with French data. IZA discussion paper 4989, Institute for the Study of Labor.
Calavrezo, O. and Lodin, F. (2012) Short-time working arrangements in France during the crisis: An empirical analysis of firms and employees. Comparative Economic Studies 54 (2), 299320.
Cazes, S., Verick, S., and Hussami, F. A. (2013) Why did unemployment respond so differently to the global financial crisis across countries? Insights from Okun's law. IZA Journal of Labor Policy 2 (1), 118.
Chen, S.-S. and Chou, Y.-H. (2016) Does fear lead to recessions? Macroeconomic Dynamics 20 (05), 12471263.
Crimmann, A., Wießner, F., and Bellmann, L. (2012) Resisting the crisis: Short-time work in Germany. International Journal of Manpower 33 (8), 877900.
Diário da República (2009) Assembleia da República, Lei n.o 10/2009 de 10 de Março. 1.a série – N.o 48 – 10 de Março de 2009. URL: (last access: February 7, 2018).
Dobbins, T. (2010) Ireland: Getting prepared for the upswing: Training and qualification during the crisis. URL: (last access: February 7, 2018).
Drobnič, S. (1997) Employment policies and programmes in Slovenia. In Godfrey, M. and Richards, P. (eds.), Employment Policies and Programmes in Central and Eastern Europe, chap. 8, pp. 157182. Geneva: International Labour Office.
Economic Issues (2009) Impact of the economic crisis on the labour market in Slovenia. URL: (last access: February 7, 2018).
European Labour Law Network (2009) Partially Subsidizing Full-Time Work Act. URL: (last access: February 7, 2018).
Gehrke, B. and Hochmuth, B. (2017) Counteracting unemployment in crises: Non-linear effects of short-time work policy. IAB discussion paper 27/2017, Institute for Employment Research, Nuremberg, Germany.
Hagedorn, M. and Manovskii, I. (2008) The cyclical behavior of equilibrium unemployment and vacancies revisited. American Economic Review 98 (4), 16921706.
Hansen, L. P. (1982) Large sample properties of generalized method of moments estimators. Econometrica 50 (4), 10291054.
Hijzen, A. and Martin, S. (2013) The role of short-time work schemes during the global financial crisis and early recovery: A cross-country analysis. IZA Journal of Labor Policy 2 (1), 131.
Hijzen, A. and Venn, D. (2011) The Role of Short-Time Work Schemes During the 2008–09 Recession. OECD Social, Employment and Migration Working Papers 115, OECD Publishing.
Holtz-Eakin, D., Newey, W., and Rosen, H. S. (1988) Estimating vector autoregressions with panel data. Econometrica 56 (6), 1371–95.
Icelandic Confederation of Labour (2016) The Icelandic labour market. URL: (last access: February 7, 2018).
Im, K. S., Pesaran, M. H., and Shin, Y. (2003) Testing for unit roots in heterogeneous panels. Journal of Econometrics 115 (1), 5374.
IMF (2010) World Economic Outlook: Rebalancing Growth. Washington, DC: International Monetary Fund Publication Services.
Jahn, E. and Weber, E. (2016) Identifying the substitution effect of temporary agency employment. Macroeconomic Dynamics 20 (5), 12641281.
Judson, R. and Owen, A. (1999) Estimating dynamic panel data models: A guide for macroeconomists. Economics Letters 65, 5378.
Jung, P. and Kuhn, M. (2014) Labor market institutions and worker flows: Comparing Germany and the U.S. Economic Journal 124, 13171342.
Knotek, E. S. (2007) How useful is Okun's law? Economic Review Q 4, 73103.
Kruppe, T. and Scholz, T. (2014) Labour Hoarding in Germany: Employment Effects of Short-Time Work During the Crises. IAB discussion paper 17/2014, Institute for Employment Research, Nuremberg, Germany.
Lee, J. (2000) The robustness of Okun's law: Evidence from OECD countries. Journal of Macroeconomics 22 (2), 331356.
Lind, J. T. and Mehlum, H. (2010, 02) With or without U? The appropriate test for a U-shaped relationship. Oxford Bulletin of Economics and Statistics 72 (1), 109118.
Mandl, I. (2010) Slovenia: Partial Subsidies of Full-Time Work and Partial Reimbursement of Payment Compensation. Report EF10638, Eurofound, European Foundation for the Improvement of Living and Working Conditions, Dublin, Ireland.
Nickell, S. J. (1981) Biases in dynamic models with fixed effects. Econometrica 49 (6), 1417–26.
Niedermayer, K. and Tilly, J. (2016) Employment and Welfare Effects of Short-Time Work in Germany. Annual conference 2016 paper 145842, Verein für Socialpolitik.
OECD (2010) Employment Outlook: Moving Beyond the Jobs Crisis. Paris: Organisation for Economic Co-operation and Development, OECD Publishing.
OECD (2015) Labour force statistics in OECD countries: Sources, coverage and definitions. URL: (last access: February 7, 2018).
Owyang, M. T. and Sekhposyan, T. (2012) Okun's law over the business cycle: Was the Great Recession all that different? Review Sep, 399418.
Roodman, D. (2009a) How to do xtabond2: An introduction to difference and system GMM in Stata. Stata Journal 9 (1), 86136.
Roodman, D. (2009b) A note on the theme of too many instruments. Oxford Bulletin of Economics and Statistics 71 (1), 135158.
Sögner, L. and Stiassny, A. (2002) An analysis on the structural stability of Okun's law–A cross-country study. Applied Economics 34 (14), 17751787.
Stata (2015) Stata's User Guide. Release 14. College Station, TX: Stata Press.
Visser, J. (2015) ICTWSS Data Base, Version 5.0. Amsterdam: Amsterdam Institute for Advanced Labour Studies (AIAS).
Wießner, F. (2016) Short-time work. IAB Aktuell, Brief Overviews. URL: (last access: February 7, 2018).
Windmeijer, F. (2005) A finite sample correction for the variance of linear efficient two-step GMM estimators. Journal of Econometrics 126 (1), 2551.
Recommend this journal

Email your librarian or administrator to recommend adding this journal to your organisation's collection.

Macroeconomic Dynamics
  • ISSN: 1365-1005
  • EISSN: 1469-8056
  • URL: /core/journals/macroeconomic-dynamics
Please enter your name
Please enter a valid email address
Who would you like to send this to? *



Full text views

Total number of HTML views: 0
Total number of PDF views: 11 *
Loading metrics...

Abstract views

Total abstract views: 46 *
Loading metrics...

* Views captured on Cambridge Core between 12th June 2018 - 25th June 2018. This data will be updated every 24 hours.