Inefficient Short-Time Work

Pierre Cahuc (1, 2) , Sandra Nevoux (3)

1 ECON - Département d'économie (Sciences Po)
2 CEPR - Center for Economic Policy Research
3 Centre de recherche de la Banque de France

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.

Keywords: Short-time work; Unemployment insurance; Experience rating

Domains: Humanities and Social Sciences; Economics and Finance

Pierre Cahuc, Sandra Nevoux. Inefficient Short-Time Work. 2019. ⟨hal-03393097⟩