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Unemployment Insurance and Short-Time-Work compensation

While unemployment insurance (UI) favors the reallocation of workers by subsidizing their job search, short-time-work (STW) schemes smooth labor market fluctuations preserving employment relationships. It is not clear whether the reallocation channel or the job preservation channel should be favored, and so what is the optimal policy mix between UI and STW along the business cycle. We will consider this empirically with a focus on firms.