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Firm's demand for work hours: Evidence from multi-country and matched firm-worker data

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  • KURODA Sachiko
  • YAMAMOTO Isamu

Abstract

Using information on Japanese, UK, and German workers' work hour and matched firms' characteristics, this paper investigates whether the number of hours worked is determined by demand-side factors, and tries to introduce one possibility to explain why Japanese tend to work longer hours than workers in other countries. Based on an empirical framework that each firm sets a minimum boundary of work hours, and workers hired by the firm are not able to work less than the minimum requirement, we found that the minimum requirement depends on the fixed costs of labor that the firm bears. Specifically, firms that tend to conduct labor hoarding during recessions, presumably because of higher fixed costs, require incumbent workers to work longer hours. We also found that the greater the workers' firm-specific skills, the more firms placed demands on these workers to work longer hours, given other things are equal. Since Japanese firms have long been considered to bear large fixed costs to train workers, we interpret the long work hour requirement as a rational strategy for Japanese firms to protect those workers that have accumulated high skills from dismissal. In other words, the long work hours of Japanese workers reflect the practice of long-term employment, a typical feature of the Japanese labor market.

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Bibliographic Info

Paper provided by Research Institute of Economy, Trade and Industry (RIETI) in its series Discussion papers with number 11024.

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Length: 28 pages
Date of creation: Mar 2011
Date of revision:
Handle: RePEc:eti:dpaper:11024

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  1. Katharine G. Abraham & Susan N. Houseman, 1990. "Job Security and Work Force Adjustment: How Different are U.S. and Japanese Practices?," NBER Working Papers 3155, National Bureau of Economic Research, Inc.
  2. Mark L. Bryan, 2007. "Free to choose? Differences in the hours determination of constrained and unconstrained workers," Oxford Economic Papers, Oxford University Press, vol. 59(2), pages 226-252, April.
  3. Martinez-Granado, Maite, 2005. "Testing labour supply and hours constraints," Labour Economics, Elsevier, vol. 12(3), pages 321-343, June.
  4. Shulamit Kahn & Kevin Lang, 1992. "Constraints on the Choice of Work Hours: Agency Versus Specific-Capital," Journal of Human Resources, University of Wisconsin Press, vol. 27(4), pages 661-678.
  5. Denise J. Doiron, 2003. "Is Under-Employment due to Labour Hoarding? Evidence from the Australian Workplace Industrial Relations Survey," The Economic Record, The Economic Society of Australia, vol. 79(246), pages 306-323, 09.
  6. Kato, Takao, 2001. "The End of Lifetime Employment in Japan?: Evidence from National Surveys and Field Research," Journal of the Japanese and International Economies, Elsevier, vol. 15(4), pages 489-514, December.
  7. Kuroda, Sachiko & Yamamoto, Isamu, 2003. "Are Japanese Nominal Wages Downwardly Rigid? (Part I): Examinations of Nominal Wage Change Distributions," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 21(2), pages 1-29, August.
  8. Kahn, Shulamit & Lang, Kevin, 1991. "The Effect of Hours Constraints on Labor Supply Estimates," The Review of Economics and Statistics, MIT Press, vol. 73(4), pages 605-11, November.
  9. Kuroda, Sachiko & Yamamoto, Isamu, 2008. "Estimating Frisch labor supply elasticity in Japan," Journal of the Japanese and International Economies, Elsevier, vol. 22(4), pages 566-585, December.
  10. Kuroda, Sachiko & Yamamoto, Isamu, 2003. "Are Japanese Nominal Wages Downwardly Rigid? (Part II): Examinations Using a Friction Model," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 21(2), pages 31-68, August.
  11. Mark L Bryan, 2007. "Workers, Workplaces and Working Hours," British Journal of Industrial Relations, London School of Economics, vol. 45(4), pages 735-759, December.
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