Working Paper: CEPR ID: DP18135
Authors: Antonia Díaz; Juan J. Dolado; Álvaro Jaez; Felix Wellschmied
Abstract: This paper studies short-time work arrangements (ERTEs) when aggregate risk is partially sector-specific. In Spain, the Great Recession and the pandemic recession (aka the Great Contagion)can both be understood as being driven partially by large sector-specific shocks. However, the latter shows much less labor reallocation because ERTEs were available to firms. We showthat ERTEs stabilize unemployment rates by allowing workers to remain with their employers in highly affected sectors. However, they crowd-out labor hoarding of employers, increase thevolatility of the rate of people working and, consequently, of output, and slowdown worker reallocation away from the sectors badly hit by the recession.
Keywords: worker turnover; short-time work; COVID-19
JEL Codes: J11; J18; J21; J64
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| increase volatility in employment (J63) | affect output levels (E23) |
| ERTES (R40) | stabilize unemployment rates (J64) |
| ERTES (R40) | crowd out labor hoarding (J23) |
| ERTES (R40) | increase volatility in employment (J63) |
| ERTES (R40) | slow down worker reallocation (J29) |