We analyse the use of short-time work (STW) by Luxembourg firms during the years of economic and financial crisis (2008–2009) and the subsequent European sovereign debt crisis (2010–2013). The economic and financial crisis saw a surge in the number of firms using short-time work. We find that the likelihood that a firm applied for or used short-time work increases with demand volatility, the degree of firm-specific human capital and is higher for firms that cannot shift workers between establishments or that are more export oriented. Firms reported that 20–25% of jobs in short-time work were saved by this measure.

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We analyse the use of active labour market policy (ALMP) measures by Luxembourg firms during the years of economic and financial crisis (2008-2009) and the subsequent European sovereign debt crisis (2010-2013). About 34% of Luxembourg firms used ALMPs between 2008 and 2013. Economy-wide, the use of ALMPs increased along both the extensive margin (more firms) and the intensive margin (more measures per firm). The likelihood that a firm hired with ALMPs is greater for firms that are large, multi-establishment, domestically oriented and firms facing strong demand and competition, with concerns about labour cost pressures.

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