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The Effect of Lower Hours of Work on Wages and Employment

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  • G Houpis
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    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.

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    Bibliographic Info

    Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp0131.

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    Date of creation: Mar 1993
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    Handle: RePEc:cep:cepdps:dp0131

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    Web page: http://cep.lse.ac.uk/_new/publications/series.asp?prog=CEP

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    Cited by:
    1. Giacomo Corneo, 1995. "Distributional implications of a shorter working week: An unpleasant note," Journal of Economics, Springer, vol. 62(1), pages 25-31, February.
    2. Kapteyn, A. & Kalwij, A. & Zaidi, A., 2000. "The Myth of Worksharing," Economics Series Working Papers 9932, University of Oxford, Department of Economics.
    3. 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.
    4. 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, vol. 8(4), pages 485-509, August.
    5. Yu-Fu Chen & Michael Funke, 2002. "Working Time and Employment under Uncertainty," Dundee Discussion Papers in Economics 134, Economic Studies, University of Dundee.
    6. 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.
    7. 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).
    8. Hunt, Jennifer, 1997. "Has Work Sharing Worked in Germany?," CEPR Discussion Papers 1553, C.E.P.R. Discussion Papers.
    9. 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.
    10. 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.
    11. Felix R. FitzRoy & Michael Funke & Michael A. Nolan, 2001. "Taxation, Unemployment and Working Time in Models of Economic Growth," Discussion Paper Series, Department of Economics 200112, Department of Economics, University of St. Andrews.

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