Why and When to Help Firms Keep Workers in a Crisis

With short-time work programs, governments allow firms experiencing temporary demand or productivity shocks to reduce hours worked, while providing income support to their employees for the hours not worked. A new study by Giulia Giupponi (Bocconi University) and Camille Landais (London School of Economics) finds that such policies can improve employment outcomes for workers during periods of crisis. By participating in these programs, firms are able to retain more workers and are more likely to survive. In the event of prolonged economic shocks, however, short-time work programs may impair efficient labor market allocation.


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