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Evaluating the effects of short and medium-term temporary work reduction schemes: the case of Spain’s ERTEs during the COVID-19 outbreak

Garcia-Clemente, Javier and Rubino, Nicola and Congregado, Emilio (2022): Evaluating the effects of short and medium-term temporary work reduction schemes: the case of Spain’s ERTEs during the COVID-19 outbreak.

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Abstract

This paper presents an average treatment effect analysis of the Spain’s furlough program during the onset of the COVID-19 pandemic, using propensity score matching techniques. Merging 2020 labor force quarterly microdata, we find that the probability to be re-employed after treatment was significantly higher among the treated (furlough granted group) than in the control group (comparable non-furloughed individuals who lost their job). These results seem to be robust across models, having tested a wide range of matching specifications. Furthermore, we also explore if the Spanish furlough scheme had an uniform impact across regions with different industrial structures, concluding that the furlough participation was positively related to the probability of re�employment across any region and economic activity. Nevertheless, a different time arrangement did affect the magnitude of the effect, suggesting that it may decrease with the furlough duration. This finding advises against long lasting schemes under persistent recessions, notwithstanding, short time work schemes still stand as useful strategies to face essentially transitory adverse shocks.

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