On the Option Effects of Short-Time Work Arrangements

Kuno Huisman; J.J.J. Thijssen

On the Option Effects of Short-Time Work Arrangements

Kuno Huisman, J.J.J. Thijssen

Econometrics and Operations Research

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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 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

Keywords

temporary unemployment
real options
dynamic cost-benefit analysis

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2018-004Submitted manuscript, 324 KB

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On the Option Effects of Short-Time Work Arrangements

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