Hostname: page-component-cd9895bd7-7cvxr Total loading time: 0 Render date: 2024-12-23T03:41:20.541Z Has data issue: false hasContentIssue false
  • English
  • Français

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

Published online by Cambridge University Press:  12 June 2018

Björn Brey  and
Matthias S. Hertweck
Björn Brey
Affiliation:
University of Nottingham
Matthias S. Hertweck*
Affiliation:
Deutsche Bundesbank
*
Address correspondence to: Matthias S. Hertweck, Deutsche Bundesbank, Central Office, Directorate General Economics, Wilhelm-Epstein-Straße 14, 60431 Frankfurt am Main, Germany; e-mail: [email protected]; website: http://www.hertweck.org/
Get access Rights & Permissions [Opens in a new window]

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.

Keywords

Job DestructionLabor Market PolicyShort-Time WorkUnemployment
Type
Articles
Information
Macroeconomic Dynamics , Volume 24 , Issue 2 , March 2020 , pp. 360 - 402
Copyright
© Cambridge University Press 2018

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Footnotes

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.

References

REFERENCES

Allen & Overy (2010) Temporary measures to promote employment in Luxembourg. URL: http://www.allenovery.com/publications/en-gb/Pages/Temporary-measures-to-promote-employment-in-Luxembourg.aspx (last access: February 7, 2018).Google Scholar
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), 328–352.Google Scholar
Anderson, T. W. and Hsiao, C. (1982) Formulation and estimation of dynamic models using panel data. Journal of Econometrics 18 (1), 47–82.CrossRefGoogle Scholar
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.CrossRefGoogle Scholar
Arellano, M. and Bover, O. (1995) Another look at the instrumental variable estimation of error-components models. Journal of Econometrics 68 (1), 29–51.CrossRefGoogle Scholar
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.Google Scholar
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).Google Scholar
Ball, L. M., Leigh, D., and Loungani, P. (2017) Okun's law: Fit at 50? Journal of Money, Credit and Banking 49 (7), 1413–1441.CrossRefGoogle Scholar
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), 99–122.CrossRefGoogle Scholar
Bellmann, L. and Gerner, H.-D. (2011) Reversed roles? Wage effects of the current crisis. Research in Labor Economics 32, 181–206.CrossRefGoogle Scholar
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. 165–207. Cham, Switzerland: Springer International Publishing.CrossRefGoogle Scholar
Berger, T. and Vierke, H. (2017) Estimating the natural rate of hours. Macroeconomic Dynamics 21 (6), 1426–1453.CrossRefGoogle Scholar
Blundell, R. and Bond, S. (1998) Initial conditions and moment restrictions in dynamic panel data models. Journal of Econometrics 87 (1), 115–143.CrossRefGoogle Scholar
Boeri, T. and Bruecker, H. (2011) Short-time work benefits revisited: Some lessons from the Great Recession. Economic Policy 26 (68), 697–765.CrossRefGoogle Scholar
Boeri, T. and van Ours, J. (2013) The Economics of Imperfect Labor Markets, 2nd ed. Princeton, NJ: Princeton University Press.CrossRefGoogle Scholar
Bowsher, C. (2002) On testing overidentifying restrictions in dynamic panel data models. Economic Letters 77, 211–220.CrossRefGoogle Scholar
Braun, H. and Brügemann, B. (2017) Welfare Effects of Short-Time Compensation. Discussion paper 17-010/VI, Tinbergen Institute.CrossRefGoogle Scholar
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. 161–178. Amsterdam: JAI Press.CrossRefGoogle Scholar
Cahuc, P. and Carcillo, S. (2011) Is short-time work a good method to keep unemployment down? Nordic Economic Policy Review 1, 133–164.Google Scholar
Cahuc, P. and Nevoux, S. (2017) Inefficient Short-Time Work. Discussion paper 12269, Centre for Economic Policy Research.CrossRefGoogle Scholar
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.Google Scholar
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), 299–320.CrossRefGoogle Scholar
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), 1–18.CrossRefGoogle Scholar
Chen, S.-S. and Chou, Y.-H. (2016) Does fear lead to recessions? Macroeconomic Dynamics 20 (05), 1247–1263.CrossRefGoogle Scholar
Crimmann, A., Wießner, F., and Bellmann, L. (2012) Resisting the crisis: Short-time work in Germany. International Journal of Manpower 33 (8), 877–900.CrossRefGoogle Scholar
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: https://dre.pt/application/dir/pdf1sdip/2009/03/04800/0158501601.pdf (last access: February 7, 2018).Google Scholar
Dobbins, T. (2010) Ireland: Getting prepared for the upswing: Training and qualification during the crisis. URL: https://www.eurofound.europa.eu/observatories/eurwork/comparative-information/national-contributions/ireland/ireland-getting-prepared-for-the-upswing-training-and-qualification-during-the-crisis (last access: February 7, 2018).Google Scholar
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. 157–182. Geneva: International Labour Office.Google Scholar
Economic Issues (2009) Impact of the economic crisis on the labour market in Slovenia. URL: http://www.umar.gov.si/fileadmin/user_upload/publikacije/izzivi/2009/lm09.pdf (last access: February 7, 2018).Google Scholar
European Labour Law Network (2009) Partially Subsidizing Full-Time Work Act. URL: http://www.labourlawnetwork.eu/national_labour_law/national_legislation/legislative_developments/prm/109/v_detail/id_609/category_31/index.html (last access: February 7, 2018).Google Scholar
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.Google Scholar
Hagedorn, M. and Manovskii, I. (2008) The cyclical behavior of equilibrium unemployment and vacancies revisited. American Economic Review 98 (4), 1692–1706.CrossRefGoogle Scholar
Hansen, L. P. (1982) Large sample properties of generalized method of moments estimators. Econometrica 50 (4), 1029–1054.CrossRefGoogle Scholar
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), 1–31.CrossRefGoogle Scholar
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.Google Scholar
Holtz-Eakin, D., Newey, W., and Rosen, H. S. (1988) Estimating vector autoregressions with panel data. Econometrica 56 (6), 1371–95.CrossRefGoogle Scholar
Icelandic Confederation of Labour (2016) The Icelandic labour market. URL: http://www.asi.is/engpol/ (last access: February 7, 2018).Google Scholar
Im, K. S., Pesaran, M. H., and Shin, Y. (2003) Testing for unit roots in heterogeneous panels. Journal of Econometrics 115 (1), 53–74.CrossRefGoogle Scholar
IMF (2010) World Economic Outlook: Rebalancing Growth. Washington, DC: International Monetary Fund Publication Services.Google Scholar
Jahn, E. and Weber, E. (2016) Identifying the substitution effect of temporary agency employment. Macroeconomic Dynamics 20 (5), 1264–1281.CrossRefGoogle Scholar
Judson, R. and Owen, A. (1999) Estimating dynamic panel data models: A guide for macroeconomists. Economics Letters 65, 53–78.CrossRefGoogle Scholar
Jung, P. and Kuhn, M. (2014) Labor market institutions and worker flows: Comparing Germany and the U.S. Economic Journal 124, 1317–1342.CrossRefGoogle Scholar
Knotek, E. S. (2007) How useful is Okun's law? Economic Review Q 4, 73–103.Google Scholar
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.Google Scholar
Lee, J. (2000) The robustness of Okun's law: Evidence from OECD countries. Journal of Macroeconomics 22 (2), 331–356.CrossRefGoogle Scholar
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), 109–118.CrossRefGoogle Scholar
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.Google Scholar
Nickell, S. J. (1981) Biases in dynamic models with fixed effects. Econometrica 49 (6), 1417–26.CrossRefGoogle Scholar
Niedermayer, K. and Tilly, J. (2016) Employment and Welfare Effects of Short-Time Work in Germany. Annual conference 2016 paper 145842, Verein für Socialpolitik.Google Scholar
OECD (2010) Employment Outlook: Moving Beyond the Jobs Crisis. Paris: Organisation for Economic Co-operation and Development, OECD Publishing.Google Scholar
OECD (2015) Labour force statistics in OECD countries: Sources, coverage and definitions. URL: http://www.oecd.org/els/emp/LFSNOTES_SOURCES.pdf (last access: February 7, 2018).Google Scholar
Owyang, M. T. and Sekhposyan, T. (2012) Okun's law over the business cycle: Was the Great Recession all that different? Review Sep, 399–418.Google Scholar
Roodman, D. (2009a) How to do xtabond2: An introduction to difference and system GMM in Stata. Stata Journal 9 (1), 86–136.CrossRefGoogle Scholar
Roodman, D. (2009b) A note on the theme of too many instruments. Oxford Bulletin of Economics and Statistics 71 (1), 135–158.CrossRefGoogle Scholar
Sögner, L. and Stiassny, A. (2002) An analysis on the structural stability of Okun's law–A cross-country study. Applied Economics 34 (14), 1775–1787.CrossRefGoogle Scholar
Stata (2015) Stata's User Guide. Release 14. College Station, TX: Stata Press.Google Scholar
Visser, J. (2015) ICTWSS Data Base, Version 5.0. Amsterdam: Amsterdam Institute for Advanced Labour Studies (AIAS).Google Scholar
Wießner, F. (2016) Short-time work. IAB Aktuell, Brief Overviews. URL: http://www.iab.de/en/iab-aktuell/brief-overviews/short-time-work.aspx (last access: February 7, 2018).Google Scholar
Windmeijer, F. (2005) A finite sample correction for the variance of linear efficient two-step GMM estimators. Journal of Econometrics 126 (1), 25–51.CrossRefGoogle Scholar