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The Effectiveness of Job-Retention Schemes: COVID-19 Evidence From the German States
Author:
Mr. Shekhar Aiyar
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and
Mai Daonull

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Series:
IMF Working Papers
Volume/Issue:
Volume 2021: Issue 242
Language:
English
Publication Date:
01 Oct 2021
DOI:
https://doi.org/10.5089/9781513596174.001
ISBN:
9781513596174
ISSN:
1018-5941
Pages:
37
Keywords:
Kurzarbeit; Short-time work; Unemployment; Covid-19; KA take-up; job-retention scheme; labor demand shock; evidence from the German States; employment growth; Labor demand; Employment; Labor markets; COVID-19; Global
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IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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Kurzarbeit (KA), Germany’s short-time work program, is widely credited with saving jobs and supporting domestic demand during the COVID-19 recession. We quantify the impact by exploiting state-level variation in exposure to the pandemic shock and KA take-up. We construct a shift-share measure of the labor demand shock and instrument KA take-up using the pre-existing, state-specific share of workers eligible for KA. We find, first, that KA was crucial in mitigating unemployment: absent its expansion the unemployment rate would have increased by an additional 3 pp on average at the trough of the recession. Second, KA also bolstered domestic demand: the contraction in consumption could have been 2 to 3 times larger absent the program. Finally, we provide preliminary evidence on the sensitivity of the medium-run reallocation of resources to the prevalence of jobretention schemes during the Global Financial Crisis.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund
Volume 2021: Issue 242