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Designing the Optimal Length of Working Time

Author

Listed:
  • Carlo Altavilla

    (CELPE University of Salerno, University of Naples Parthenope)

  • Antonio Garofalo

    (CELPE University of Salerno, University of Naples Parthenope)

  • Concetto Paolo Vinci

    (CELPE,University of Salerno)

Abstract

How many hours per week should workers in the United States and Germany spend at their paying jobs? The present paper addresses this question by constructing policymakers’ reaction functions capable of modelling the optimal length of working time as a function of the relevant labour market variables. The empirical analysis is based on the optimal control algorithm. Given a policymaker’s loss function and a structural model of the labour market we define alternative specifications of reaction functions where the response coefficients indicate how policymakers should react to any news in the labour market in order to stabilize employment and wages. We also perform a comparative analysis on the ability of the rules to correspond to historical working-time records. The results suggest that simple rules perform quite well and that the advantages obtained from adopting an optimal control-based rule are not so great. Moreover, the analysis emphasizes the success of the wage-based rule and of the employment based rule in the US and Germany, respectively. Finally, we propose a policy rule to capture the dynamics of the weekly working hours. According to our rule the length of the workweek is an inverse function of the deviation between the actual and potential employment level.

Suggested Citation

  • Carlo Altavilla & Antonio Garofalo & Concetto Paolo Vinci, 2005. "Designing the Optimal Length of Working Time," CELPE Discussion Papers 91, CELPE - CEnter for Labor and Political Economics, University of Salerno, Italy.
    • Handle: RePEc:sal:celpdp:91
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    Citations

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    Cited by:

    1. Roberto Basile & Mauro Costantini & Sergio Destefanis, 2005. "Unit root and cointegration tests for cross-sectionally correlated panels. Estimating regional production functions," CELPE Discussion Papers 94, CELPE - CEnter for Labor and Political Economics, University of Salerno, Italy.

    More about this item

    Keywords

    Policy Rule; Working-time; Dynamic Optimization;
    All these keywords.

    JEL classification:

    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models

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