Page 10 - IDEA Kurzarbeit zahranicni zkusenost Covid19 duben2020 13
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SHORT-TIME WORK AND RELATED MEASURES TO MITIGATE
THE CONSEQUENCES OF A (PARTIAL) ECONOMIC SHUTDOWN IDEA 2020
D. Costs and Losses Due to Rapid Implementation
New government programs take time to reach full functionality. Information about programs spreads slowly, leading to imperfect take-up. Both program administrators and recipients need time to learn how to run and use a new program optimally. It is likely that initial implementations, particularly when done quickly, will be less than ideal and require later corrections. For measures taken now, a particular important aspect is that both the government and individuals have limited capacity. Individuals face constraints in their communication and mobility and therefore have an even harder time finding and applying for government programs even when they are in need and are eligible. The short-run nature of these programs likely hinders information from spreading quickly. Government bureaucracy faces severe constraints on labor supply and the possibility to interact with clients. It also seems more sensible to use government capacity to solve the health crisis than to evaluate and process applications for support.
In economic terms, these are the consequences of temporary frictions arising from information costs, learning and uncertainty about optimal policy parameters. In the current situation, it is useful to highlight these temporary frictions and to distinguish them from the long-run policy costs outlined above, because they will likely be large for programs that are quickly implemented and only operate in the short run.
Bottom line
To minimize the costs arising from quick implementation with little scope for “learning by doing”, policies implemented now should be simple, transparent and easily accessible. If they are not simple, they will not be run well in the current situation. If they are not transparent and accessible, they will miss many people in need. Opaque programs skew program receipt to the less needy, likely leading to wasteful spending and corruption, while at the same time missing many people who are truly in need (and more likely to not have the capacity to figure out a new support system).
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