Kristina Saveska (FAU Erlangen-Nürnberg)
This paper studies the non-linear nature of discretionary short-time work policy interventions through the lenses of a theoretical model, revealing their effectiveness to be at least three times larger when implemented during recessions compared to expansions. It emphasizes the strategic importance of targeting individuals on the margin of separation, highlighting the critical role of short-time work policy design. Reducing the firms short-time work adjustment costs during recessions can notably mitigate job losses, potentially saving over half a million jobs while remaining cost-efficient. Alternately, a policy that facilitates access to short-time work, despite its highly non-linear nature, can create dead-weight effects. Considering these non-linear effects, an optimal design of short-time work policies can effectively leverage them to accelerate economic recovery.