The effects of short-time work programs during economic shocks
(2025)
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- Short-Time Work (STW) programs are social insurance schemes that subsidize temporary reductions in working hours to prevent layoffs during economic shocks. Widely used in Europe, STW aims to preserve firm–worker matches, protect job-specific human capital, and stabilize labor markets during downturns. This thesis investigates the effectiveness of STW in preserving employment and supporting firm survival during two major economic crises: the Great Recession and the COVID-19 pandemic. By leveraging Belgium’s uniquely high take-up rates and institutional features, the analysis provides new causal evidence on the conditions under which STW succeeds or fails in preserving employment. Chapter 1 offers a comparative institutional and literature review of STW schemes in Europe, emphasizing their complementarities with unemployment insurance, discussing firm behavioral responses that reduce program efficiency, and highlighting the importance of monitoring, co-insurance, and eligibility design to improve their effectiveness. Chapter 2 evaluates the employment effects of Belgium’s STW program during the Great Recession using an instrumental variable (IV) approach and finds that employment gains were concentrated in small manufacturing firms, while deadweight losses were prevalent in other economic sectors. Chapter 3 employs a Fuzzy Regression Discontinuity Design (RDD), exploiting a temporary reform during the COVID-19 crisis that introduced an eligibility threshold for the more generous and simplified STW scheme implemented during this period. It shows that simplified STW access increased take-up and preserved jobs in partially lockdown-affected firms, with stronger effects in white-collar-intensive firms. However, there are limited gains in lockdown-unaffected sectors, particularly for firms with a larger concentration of blue-collar workers. Together, the findings underscore that STW’s effectiveness depends not only on the severity of shocks but also on firm characteristics, administrative design, and targeting. The thesis contributes to ongoing policy debates on labor market resilience and the optimal design of job-preserving interventions during crises.
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Bermudez Barrezueta, N. A. (2025). The effects of short-time work programs during economic shocks. https://hdl.handle.net/2078.5/270841