Page 27 - 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
To reduce policy costs, the policy should be as self-targeting as is feasible. It should deter take-up by those who do not lose income, who can recover it later, or who can manage without help for other reasons. Toward this end, the government can make the means by which these employers and employees deal with the usual economic fluctuations more attractive, e.g. by making loans available, simple, and cheap. At the same time, one can make short-time work relatively unattractive for those who are likely to do well in the long run. The key tool to doing so in the current situation is to use ex-post targeting rather than ex-ante screening. Even ex-post screening and the threat of being required to pay back part of the benefits is preferable to the bureaucracy and imperfection of ex-ante screening. A simpler and more transparent solution is an ex-post tax that is proportional to the amount received, but also proportional to some measure of long term economic performance, such as the ratio of income or revenue in the year after the crisis and the year before the crisis. For an example of a specific proposal, see the discussion by Mankiw from March 23. Loans can also incorporate some element of ex post targeting by adjusting interest rates later or offering to waive them after the crisis if necessary.
Targeting ex-post not only helps to keep policy costs low, it is also a key tool to reduce the cost of quick implementation. Quickly implementing relief policies in times of low capacity requires extremely simple applications and eligibility checks. Otherwise the program will overburden the bureaucracy and miss many who are in need. These problems can be so severe that they have been used as arguments for universal handouts, i.e. to allow everyone to take-up the program. Making programs self-targeting and evaluating targeting ex post along the lines of the suggestions above can allow the government to provide quick and unbureaucratic relief while still keeping program costs manageable.
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