When Might a Distressed Firm Share Work? Evidence from the Short‐Time Compensation Programme in France

Abstract

This paper analyses the participation patterns of publicly funded short‐time compensation benefits (STC) in France. The regression equation directly models the choice of work units facing slack demand to adjust their labour force by declaring redundancies or by implementing an STC agreement. The likelihood of adopting the work‐sharing mode is related to certain firm and labour force attributes, labour market institutions and policy parameters. The results suggest that employment protection laws increase the incidence of STC usage and hence decrease employers’ recourse to layoffs. Work‐forces receiving relatively high levels of pay and exhibiting relatively low levels of labour force attachment are less likely to participate in the STC programme, ceteris paribus. Although the programme is designed to prevent cyclical layoffs, there is preliminary evidence that chronic usage in instances of permanent layoffs is fairly widespread.

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