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THE EXTENSION OF SHORT-TIME WORK SCHEMES DURING THE GREAT RECESSION: A STORY OF SUCCESS?

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

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.

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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: matthias.hertweck@bundesbank.de; website: http://www.hertweck.org/
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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.

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Macroeconomic Dynamics
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