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The Effects of Labor Market Conditions on Working Time: the US-EU Experience

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Author Info
Michelacci, Claudio
Pijoan-Mas, Josep

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Abstract

We consider a labor market search model where, by working longer hours, individuals acquire greater skills and thereby obtain better jobs. We show that job inequality, which leads to within-skill wage differences, gives incentives to work longer hours. By contrast, a higher probability of losing jobs, a longer duration of unemployment, and in general a less tight labor market discourage working time. We show that the different evolution of labor market conditions in the US and in Continental Europe over the last three decades can quantitatively explain the diverging evolution of the number of hours worked per employee across the two sides of the Atlantic. It can also explain why the fraction of prime age male workers working very long hours has increased substantially in the US, after reverting a trend of secular decline.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 6314.

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Date of creation: May 2007
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Handle: RePEc:cpr:ceprdp:6314

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Related research
Keywords: human capital search unemployment wage inequality working hours

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Find related papers by JEL classification:
E24 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution
G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Investment Policy
J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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