The Employment and Output Effects of Short-Time Work in Germany
We study the employment and output effects of the short-time work (STW) policy in Germany between 2009 and 2010. This intervention facilitated reductions in hours worked per employee with the goal of preventing layoffs. Using confidential German micro-level data we estimate a search model with heterogeneous multi-worker firms as a basis for policy analysis. Our findings suggest that STW can prevent increases in unemployment during a recession. However, the policy leads to a decrease in the allocative efficiency of the labor market, resulting in significant output losses. These effects arise from a reduction in the vacancy filling rate resulting from the policy intervention.
This research project has received funding from the European Union’s 7th Framework Programme (FP7/2007-2013) under grant agreement 262608, DwB - Data without Boundaries. We declare that we have no relevant or material financial interests that relate to the research described in this paper. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research. Findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of the World Bank or any affiliated organizations, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work.