The aggregate effects of short-time work: Firms, productivity and long-run effects

• Applicants: Professorin Dr. Britta Gehrke; Dr. Nicolas Syrichas
• Subject Area: Economic Policy, Applied Economics ; Economic Theory
• Term: since 2026
• Project identifier: Deutsche Forschungsgemeinschaft (DFG) - Project number 577695236

Short-time work is a key labor market instrument in Germany and other OECD countries that subsidizes temporary reductions in working hours to preserve employment during downturns. While its short-run stabilizing effects are well documented, little is known about its implications for structural change and long-run economic outcomes. We address this gap by studying the long-run effects of short-time work on labor reallocation, team-structure disruption, and capital accumulation. We will pursue three separate but complementary research projects: (i) quantify the trade-off between preserving worker-firm matches and impeding reallocation toward more productive firms; (ii) examine whether short-time work sustains team-based production structures, mitigating productivity losses from team disruption; and (iii) analyze how short-time work affects firms' investment decisions and capital-labor substitution. Our proposal combines rich German administrative employer-employee data, establishment surveys, and household panel data to provide descriptive and (potentially) causal evidence. We will rationalize the empirical findings via rich structural firm-based general equilibrium models incorporating on-the-job search, organizational complementarities, and capital accumulation. The final outcomes will include three peer-reviewed papers and a policy brief that will provide robust policy-relevant recommendations on designing short-time work programs and the subsequent long-run effects.

• DFG Programme: Research Grants
• International Connection: Austria
• Cooperation Partner: Dr. Leopold Zessner-Spitzenberg
• Co-Investigator: Dr. Christian Kagerl