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Implementing the 35 Hour Workweek by Means of Overtime Taxation

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  • Victoria Osuna

    (Universidad Pablo de Olavide)

  • Jose-Victor Rios-Rull

    (University of Pennsylvania)

Abstract

This paper studies the implications of taxing overtime work to reduce the workweek. We study the roles played by team work, commuting costs and idiosyncratic output risk in determining the choice of the workweek. To obtain reliable estimates, we calibrate the model to the substitutability between overtime and employment using business cycle information. We find that a tax-rate of 12% of overtime wages reduces the workweek from 40 to 35 hours. This tax change increases employment by 7% and reduces output and productivity by 10.2% and 4.2%, respectively. Moreover, the welfare costs of this policy seem to be very large. (Copyright: Elsevier)

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Bibliographic Info

Article provided by Elsevier for the Society for Economic Dynamics in its journal Review of Economic Dynamics.

Volume (Year): 6 (2003)
Issue (Month): 1 (January)
Pages: 179-206

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Handle: RePEc:red:issued:v:6:y:2003:i:1:p:179-206

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Related research

Keywords: Workweek; Overtime; 35 hour workweek; Labor policy;

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References

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  1. Richard Rogerson, 2010. "Indivisible Labor, Lotteries and Equilibrium," Levine's Working Paper Archive 250, David K. Levine.
  2. Terry J. Fitzgerald, 1996. "Reducing working hours," Economic Review, Federal Reserve Bank of Cleveland, issue Q IV, pages 13-22.
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Citations

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Cited by:
  1. Céspedes, Nikita & Kuklik, Michael, 2013. "Optimal Taxation and Life Cycle Labor Supply Profile," Working Papers 2013-020, Banco Central de Reserva del Perú.
  2. Andrés Erosa & Luisa Fuster & Gueorgui Kambourov, 2011. "Labor supply and government programs: A cross-country analysis," Working Papers 2011-08, Instituto Madrileño de Estudios Avanzados (IMDEA) Ciencias Sociales, revised 19 Oct 2011.
  3. Edward C. Prescott & Richard Rogerson & Johanna Wallenius, 2009. "Lifetime Aggregate Labor Supply with Endogenous Workweek Length," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 12(1), pages 23-36, January.
  4. Prescott, Edward & Shell, Karl, 2002. "Introduction to Sunspots and Lotteries," Working Papers 02-08, Cornell University, Center for Analytic Economics.
  5. Andres Erosa & Luisa Fuster & Gueorgui Kambourov, 2014. "Towards a Micro-Founded Theory of Aggregate Labor Supply," Working Papers tecipa-516, University of Toronto, Department of Economics.
  6. Antonio Morales & Pablo Brañas Garza, 2003. "Computational Errors in Guessing Games1," Economic Working Papers at Centro de Estudios Andaluces E2003/11, Centro de Estudios Andaluces.
  7. Alexander Ueberfeldt, 2006. "Working Time over the 20th Century," Working Papers 06-18, Bank of Canada.
  8. Antonio García Sánchez & María del Mar Vázquez Méndez, 2005. "The timing of work in a general equilibrium model with shiftwork," Investigaciones Economicas, Fundación SEPI, vol. 29(1), pages 149-179, January.
  9. Edward C. Prescott, 2003. "Non-Convexities in Quantitative General Equilibrium Studies of Business Cycles," Levine's Working Paper Archive 506439000000000372, David K. Levine.
  10. Fabrice Gilles, 2014. "Evaluating the impact of a working time regulation on capital operating time. The French 35-hour work week experience," Working Papers hal-01006765, HAL.
  11. Osune, Victoria, 2014. "Working-week flexibility: Implications for employment and productivity," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy, vol. 8(7), pages 1-29.
  12. Osuna, Victoria, 2013. "Working-week flexibility: Implications for employment and productivity," Economics Discussion Papers 2013-27, Kiel Institute for the World Economy.
  13. Díaz, Antonia & Echevarria, Cristina, 2009. "Why a fixed workweek?," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 38(5), pages 790-798, October.
  14. Victoria Osuna, 2009. "Should we tax overtime, subsidize the wage or subsidize employment?," Working Papers 09.03, Universidad Pablo de Olavide, Department of Economics.

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