Abstract
We analyse the short term 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 language | English |
|---|---|
| Place of Publication | Tilburg |
| Publisher | CentER, Center for Economic Research |
| Number of pages | 33 |
| Volume | 2018-004 |
| Publication status | Published - 8 Feb 2018 |
Publication series
| Name | CentER Discussion Paper |
|---|---|
| Volume | 2018-004 |
Fingerprint
Keywords
- temporary unemployment
- real options
- dynamic cost-benefit analysis
Cite this
Huisman, K., & Thijssen, J. J. J. (2018). On the Option Effects of Short-Time Work Arrangements. (CentER Discussion Paper; Vol. 2018-004). Tilburg: CentER, Center for Economic Research.