On the Option Effects of Short-Time Work Arrangements

Kuno Huisman, J.J.J. Thijssen

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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 languageEnglish
Place of PublicationTilburg
PublisherCentER, Center for Economic Research
Number of pages33
Volume2018-004
Publication statusPublished - 8 Feb 2018

Publication series

NameCentER Discussion Paper
Volume2018-004

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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.