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Employment and Distributional Effects of Restricting Working Time Author info | Abstract | Publisher info | Download info | Related research | Statistics Marimon, Ramon
Zilibotti, Fabrizio
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We study the emplyment and distributional effects of regulating (reducing) working time in a general equilibrium model with search-matching frictions. Job creation entails some fixed costs, but existing jobs are subject to diminishing returns. We characterize the equilibrium in the de-regulated economy where large firms and individual workers freely negotiate wages and hours. Then, we consider the effects of a legislation restricting the maximum working time, while we let wages respond endogenously. In general, this regulation benefits workers, both unemployed and employed (even if wages decrease), but reduces profits and and output. Employment effects are sensitive to the representation of preferences. In our benchmark, small reductions in working time, starting from the laissez-faire equilibrium solution, always increase employment, while larger reductions reduce employment. However, the employment gains from reducing working time are relatively small
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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number
2127.
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Date of creation: Apr 1999Date of revision:
Handle: RePEc:cpr:ceprdp:2127Contact details of provider: Postal: Centre for Economic Policy Research, 53--56 Great Sutton Street, London EC1V 0DG Phone: 44 - 20 - 7183 8801 Fax: 44 - 20 - 7183 8820
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Keywords: Hours Reduction ; Leisure ; Search ; Unemployment ; Wage ; Work Sharing ; Working Time ; Other versions of this item:
Find related papers by JEL classification: E24 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution E25 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
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