On the firm’s option values of short-time work policies
Huisman,Kuno Thijssen,Jacco
Huisman,Kuno
Thijssen,Jacco
Abstract
We analyse the short-time 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.
Description
Publisher Copyright: © 2020, The Author(s).
Date
2020-03-01
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Research Projects
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Keywords
temporary unemployment, real options, dynamic cost-benefit analysis, G33 - Bankruptcy ; Liquidation, G38 - Government Policy and Regulation, H53 - Government Expenditures and Welfare Programs, SDG 10 - Reduced Inequalities
Citation
Huisman, K & Thijssen, J 2020, 'On the firm’s option values of short-time work policies', Mathematics and Financial Economics, vol. 14, no. 2, pp. 329-351. https://doi.org/10.1007/s11579-020-00258-x