Working Paper: CEPR ID: DP13041
Authors: Pierre Cahuc; Francis Kramarz; Sandra Nevoux
Abstract: Short-time work programs were revived by the Great Recession. To understand their operating mechanisms, we first provide a model showing that short-time work may save jobs in firms hit by strong negative revenue shocks, but not in less severely-hit firms, where hours worked are reduced, without saving jobs. The cost of saving jobs is low because short-time work targets those at risk of being destroyed. Using extremely detailed data on the administration of the program covering the universe of French establishments, we devise a causal identification strategy based on the geography of the program that demonstrates that short-time work saved jobs in firms faced with large drops in their revenues during the Great Recession, in particular when highly levered, but only in these firms. The measured cost per saved job is shown to be very low relative to that of other employment policies.
Keywords: short-time work; unemployment; employment
JEL Codes: E24; J22; J65
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| short-time work programs (J68) | saved jobs (J63) |
| revenue drops (H27) | short-time work programs (J68) |
| short-time work programs (J68) | employment outcomes (J68) |
| strong negative revenue shocks (F69) | utilize short-time work (J22) |
| short-time work (J22) | limit decline in total hours worked (J29) |
| short-time work (J22) | jobs not at risk of destruction (J68) |
| highly leveraged firms (G32) | saved jobs through short-time work (J65) |
| short-time work (J22) | efficient use of subsidies (H23) |
| credit-constrained firms (D22) | effective at saving jobs during downturns (J65) |