DP12269 Inefficient Short-Time Work
Author(s): | Pierre Cahuc, Sandra Nevoux |
Publication Date: | September 2017 |
Keyword(s): | experience rating, Short-time work, Unemployment insurance |
JEL(s): | J63, J65 |
Programme Areas: | Labour Economics, Public Economics |
Link to this Page: | cepr.org/active/publications/discussion_papers/dp.php?dpno=12269 |
This paper shows that the reforms which expanded short-time work in France after the great 2008-2009 recession were largely to the benefit of large firms which are recurrent short-time work users. We argue that this expansion of short-time work is an inefficient way to provide insurance to workers, as it entails cross-subsidies which reduce aggregate production. An efficient policy should provide unemployment insurance benefits funded by experience rated employers' contributions instead of short-time work benefits. We find that short-time work entails significant production losses compared to an unemployment insurance scheme with experience rating.