Research

Job Market Paper

Experience Rating in Short-Time Work [COMPLETE DRAFT]

A central labour market policy response to both the Great Recession and the COVID-19 crisis, short-time work (STW) is a government program that subsidises reductions in working hours to prevent layoffs in firms experiencing temporary shocks. However, by providing financial support for reduced working time, STW inherently creates incentives for excessive take-up absent financial disincentives. This paper examines two reforms of the Belgian STW system, implemented in 2005 and 2012, which introduced firm-level taxes on individual workers’ STW take-up to mitigate distortions in working hours and covering about 15% of firms in STW. Drawing on employer-employee longitudinal data and bunching designs, I provide novel evidence that both reforms resulted in a significant decline in STW for individual workers, primarily impacting jobs at the top of the wage bill distribution. Additionally, I identify a dynamic sequence of significant but short-lived firm-level co-worker spillovers. After the reform, firms downscaled STW intensity for individual workers to share the STW working time reduction with a wider pool of co-workers. These effects are rationalised by a search and matching model featuring idiosyncratic productivity shocks and an institutional setting with downward wage rigidity, firing costs, and financial experience-rated taxes in STW provision. These behavioural adjustments generate fiscal savings of EUR0.05 for every euro invested in STW. While seemingly modest, this translates into a total expenditure reduction of EUR38,338 million in 2012 alone.

Presented at: Internal Seminar Series 2023 (UGent), Research Day 2023 (UGent), Sciences Po Public/Labour Reading Group (2024), IIPF (2024), EALE (2024), Internal Seminars National Bank of Belgium (2025)

Shortlisted for: PhD Prize from European Society of Population Economics 2025

Working papers

Theory and Empirics of Short-Time Work: A Review, with Natalia Bermúdez & Muriel Dejemeppe [COMPLETE DRAFT - Submitted]

Following massive take-up rates during the COVID-19 period, short-time work (STW) policies have attracted renewed interest. In this paper, we take stock of this policy instrument and provide a critical review of STW systems in Europe. We focus on the objectives of STW programs and their primary characteristics, as well as the inefficiencies associated with these policies, such as excessive use and slower worker reallocation. Additionally, we take a stroll through the main contributions of STW impact evaluations. Finally, we identify relevant directions for the refinement of the main design features of the scheme, key lessons, and avenues for future research.

Hiring Subsidies and Temporary Work Agencies, with Natalia Bermúdez & Sam Desiere - [IZA Working Paper - Revise & Resubmit at Labour Economics]

This paper evaluates a hiring subsidy for lower-educated youths in Flanders (Belgium) that reduced labour costs by approximately 13% for a period of two years, starting in 2016. Using a donut Regression Discontinuity Design, we find no evidence that the subsidy improved the job finding rate of eligible job seekers in 2016-19, a period marked by a tight labour market. We then investigate the role of temporary work agencies, which disproportionately employ the target group and obtain 25% to 34% of the subsidies. Using Difference-in-Differences regressions, we demonstrate that agencies did not raise wages of eligible agency workers in response to the policy. Remarkably, despite a 3.3% labour cost reduction, full-time equivalent employment of eligible workers in these agencies decreased by 9.2% over the three years following the reform. Our findings highlight how an active labour market policy affects agency employment.

Presented at: Belgian Day of Labour Economists (2023), ESPE (2024), EEA-ESEM (2024)

Works in progress

Effects of Taxing Short-Time Work Policies, with Bart Cockx & Jaco De Baquer - [Draft available under request]

Short-time work (STW) policies subsidize hour reductions for workers in firms facing temporary shocks, serving as the primary policy instrument for employment support during downturns. Yet, as with other social insurance programs, the effectiveness of STW depends critically on its design. By subsidizing reductions in working time, STW inherently incentivizes excessive take-up in the absence of financial disincentives, challenging the notion that only viable firms use STW to preserve short-term shock-affected but long-term profitable employment relationships. We examine two Belgian reforms that introduced STW taxes on firms exceeding a 110-day threshold of STW use per worker. Leveraging administrative data and a donut regression discontinuity design in the firm tax schedule, we estimate the impact of employer-borne STW taxes on firm behavior. We find that tax increases significantly reduce employment, particularly among liquidity-constrained firms, while also leading to a modest rise in firm-level profitability. We further show that firms pass these tax increases onto workers by dampening the variable pay component.

Presented at: UCLouvain Doctoral Workshop (2021, 2022), Research Day 2022 (UGent), PSE European Doctoral Program Jamboree (2023), Italian Association of Labour Economics (2023), Belgian Day of Labour Economics (2023)