Reemployment premium effect of furlough programs: evaluating Spain’s scheme during the COVID-19 crisis

Last Updated: julio 18, 2023By

Garcia-Clemente, J., Rubino, N., & Congregado, E. (2023). Reemployment premium effect of furlough programs: evaluating Spain’s scheme during the COVID-19 crisis. Journal for Labour Market Research, 57(1), 17.

https://doi.org/10.1186/s12651-023-00343-w

Resumen: 

This paper presents an average treatment effect analysis of Spain’s furlough program during the onset of the COVID-19 pandemic. Using 2020 labour force quarterly microdata, we construct a counterfactual made of comparable nonfurloughed individuals who lost their jobs and apply propensity score matching based on their pretreatment characteristics. Our findings show that the probability of being re-employed in the next quarter significantly increased for the treated (furlough granted group). These results appear robust across models, after testing a wide range of matching specifications that reveal a reemployment probability premium of near 30 percentage points in the group of workers who had been furloughed for a single quarter. Nevertheless, a different time arrangement affected the magnitude of the effect, suggesting that it may decrease with the furlough duration. Thus, an analogous analysis for a longer (two quarter) scheme estimated a still positive but smaller effect, approximately 12 percentage points. Although this finding might alert against long lasting schemes under persistent recessions, this policy still stands as a useful strategy to face essentially transitory adverse shocks.

 

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