Subsidizing Labour Hoarding in Recessions: The Employment and Welfare Effects of Short-time Work

Short-time work (STW) policies provide subsidies for hour reductions to workers in firms experiencing temporary shocks. They are the main policy tool used to support labour hoarding during downturns and were aggressively used during the coronavirus disease 2019 (COVID-19) pandemic. Yet, very little is known about their employment and welfare consequences. This article leverages unique administrative social security data from Italy and quasi-experimental variation in STW policy rules to offer evidence on the effects of STW on firms' and workers' outcomes during the Great Recession. Our results show large and significant negative effects of STW treatment on hours, but large and positive effects on headcount employment. We then analyse whether these positive employment effects are welfare enhancing, distinguishing between temporary and more persistent shocks. We first provide evidence that liquidity constraints and rigidities in wages and hours may make labour hoarding inefficiently low without STW. Then, we show that adverse selection of low productivity firms into STW reduces the long-run insurance value of the program and creates significant negative reallocation effects when the shock is persistent.

CARES and crime

Purpose The US signed the Coronavirus Aid, Relief, and Economic Security (CARES) Act in March 2020 to alleviate the harsh economic effects of the pandemic and related shutdowns. A substantial part of the bill expanded and increased unemployment insurance payments, where a growing area of research estimates strong anti-poverty effects. The authors examine the effect of these policies on crime. Design/methodology/approach The authors use new event study and difference-in-differences techniques to estimate the effect of increasing unemployment insurance payments on property crime and violent crime. Then, the authors estimate the effect of expanded unemployment qualification programs on crime. The authors use a rich set of controls including unemployment, contemporaneous policies and mobile device tracking data to estimate the degree to which people stayed at home. Findings They find that increasing unemployment insurance payments decreased crime by 20%, driven by a 24% decrease in property crime. The authors also find suggestive evidence that expanding unemployment qualifications decreases crime. Practical implications The authors find a new and substantial benefit of expanded unemployment insurance beyond their antipoverty effects. Originality/value To the authors' knowledge, this is the first study that directly examines the impact of the CARES Act on crime.