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The Effect of Lower Hours of Work on Wages and Employment

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  • G Houpis

Abstract

This paper examines the likely effects of a reduction in hours of work employment and wages. We firstly assume that the wage is fixed and present evidence on the direct employment effect of a fall in hours of work. We then analyze the indirect effect on employment from a change in the hourly wage when this is determined endogenously. Our results suggest that reductions in hours of work are not likely to lead to an increase in the hourly wage and will therefore reduce unemployment by sharing any given volume of work among more people. These findings are robust to a number of alternative assumptions about wage and hours determination.

Suggested Citation

  • G Houpis, 1993. "The Effect of Lower Hours of Work on Wages and Employment," CEP Discussion Papers dp0131, Centre for Economic Performance, LSE.
    • Handle: RePEc:cep:cepdps:dp0131
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    Cited by:

    1. Jennifer Hunt, 1998. "Hours Reductions as Work-Sharing," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 29(1), pages 339-381.
    2. Kapteyn, Arie & Kalwij, Adriaan & Zaidi, Asghar, 2004. "The myth of worksharing," Labour Economics, Elsevier, vol. 11(3), pages 293-313, June.
    3. Chen Yu-Fu & Funke Michael, 2004. "Working Time and Employment Under Uncertainty," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 8(3), pages 1-23, September.
    4. Tor Jacobson & Henry Ohlsson, 2000. "Working time, employment, and work sharing: Evidence from Sweden," Empirical Economics, Springer, vol. 25(1), pages 169-187.
    5. FitzRoy, Felix R. & Funke, Michael & Nolan, Michael A., 2002. "Working time, taxation and unemployment in general equilibrium," European Journal of Political Economy, Elsevier, vol. 18(2), pages 333-344, June.
    6. Regt E de, 1999. "Wage Bargaining, Working Time and Unemployment," Research Memorandum 006, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
    7. Jennifer Hunt, 1999. "Has Work-Sharing Worked in Germany?," The Quarterly Journal of Economics, Oxford University Press, vol. 114(1), pages 117-148.
    8. Anders Bjorklund & Richard B. Freeman, 1997. "Generating Equality and Eliminating Poverty, the Swedish Way," NBER Chapters, in: The Welfare State in Transition: Reforming the Swedish Model, pages 33-78, National Bureau of Economic Research, Inc.
    9. Philippe Michel & Bertrand Crettez & Pierre Granier, 1997. "Réduction de la durée du travail, qualifications et chômage," Revue Économique, Programme National Persée, vol. 48(3), pages 559-567.
    10. Hunt, Jennifer, 1996. "The Response of Wages and Actual Hours Worked to the Reduction of Standard Hours in Germany," CEPR Discussion Papers 1526, C.E.P.R. Discussion Papers.
    11. Giacomo Corneo, 1994. "La réduction du temps de travail dans les modèles de chômage d'équilibre : une revue de la littérature," Économie et Prévision, Programme National Persée, vol. 115(4), pages 63-73.
    12. de Regt, E.R., 1999. "Wage bargaining, working time and unemployment," Research Memorandum 027, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
    13. Giacomo Corneo, 1995. "Distributional implications of a shorter working week: An unpleasant note," Journal of Economics, Springer, vol. 62(1), pages 25-31, February.
    14. S. Erbaş & Chera Sayers, 2001. "Can a Shorter Workweek Induce Higher Employment? Mandatory Reductions in the Workweek and Employment Subsidies," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 8(4), pages 485-509, August.
    15. Felix R. FitzRoy & Michael Funke & Michael A. Nolan, 2001. "Taxation, Unemployment and Working Time in Models of Economic Growth," Discussion Paper Series, School of Economics and Finance 200112, School of Economics and Finance, University of St Andrews.
    16. Chang, Juin-jen & Huang, Chun-chieh & Lai, Ching-chong, 2007. "Working hours reduction and wage contracting style in a dynamic model with labor adjustment costs," Journal of Economic Dynamics and Control, Elsevier, vol. 31(3), pages 971-993, March.
    17. Nordström Skans, Oskar, 2001. "The effects of working time reductions on wages, actual hours and equilibrium unemployment," Working Paper Series 2001:8, IFAU - Institute for Evaluation of Labour Market and Education Policy.
    18. Jennifer Hunt, 1996. "The Response of Wages and Actual Hours Worked to the Reductions of Standard Hours," NBER Working Papers 5716, National Bureau of Economic Research, Inc.

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