IMF Working Papers

The Effectiveness of Job-Retention Schemes: COVID-19 Evidence From the German States

By Shekhar Aiyar, Mai Dao

October 1, 2021

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Shekhar Aiyar, and Mai Dao. The Effectiveness of Job-Retention Schemes: COVID-19 Evidence From the German States, (USA: International Monetary Fund, 2021) accessed October 8, 2024

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Summary

Kurzarbeit (KA), Germany’s short-time work program, is widely credited with saving jobs and supporting domestic demand during the COVID-19 recession. We quantify the impact by exploiting state-level variation in exposure to the pandemic shock and KA take-up. We construct a shift-share measure of the labor demand shock and instrument KA take-up using the pre-existing, state-specific share of workers eligible for KA. We find, first, that KA was crucial in mitigating unemployment: absent its expansion the unemployment rate would have increased by an additional 3 pp on average at the trough of the recession. Second, KA also bolstered domestic demand: the contraction in consumption could have been 2 to 3 times larger absent the program. Finally, we provide preliminary evidence on the sensitivity of the medium-run reallocation of resources to the prevalence of jobretention schemes during the Global Financial Crisis.

Subject: COVID-19, Employment, Health, Labor, Labor demand, Labor markets, Unemployment

Keywords: Covid-19, COVID-19, Employment, Employment growth, Evidence from the German States, Global, Job-retention scheme, KA take-up, Kurzarbeit, Labor demand, Labor demand shock, Labor markets, Short-time work, Unemployment

Publication Details

  • Pages:

    37

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

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  • Series:

    Working Paper No. 2021/242

  • Stock No:

    WPIEA2021242

  • ISBN:

    9781513596174

  • ISSN:

    1018-5941