On the option effects of short-term work arrangements

Kuno Huisman, Jacco Thijssen

Research output: Contribution to journalArticleScientificpeer-review

Abstract

We analyse the short-time work (STW) regulations that several OECD countries introduced after the 2007 financial crisis. We view these measures as a collection of real options and study the dynamic effect of STW on the endogenous liquidation decision of the firm. While STW delays a firm’s liquidation, it is not necessarily welfare enhancing. Moreover, it turns out that firms use STW too long. We show (numerically) that providers of capital benefit more than employees from STW. Benefits for employees can even be negative. A typical Nordic policy performs better than a typical Anglo-Saxon policy for all stakeholders.
Original languageEnglish
Pages (from-to)329-351
JournalMathematics and Financial Economics
Volume14
DOIs
Publication statusPublished - Jan 2020

Keywords

  • temporary unemployment
  • real options
  • dynamic cost-benefit analysis

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