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Are Working Hours Complements in Production?

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  • Shao, Lin
  • Sohail, Faisal
  • Yurdagul, Emircan

Abstract

This paper studies the degree of complementarity in working hours among coworkers in production. Using matched employer-employee data, we first present facts on the within-establishment relationship between wages and hours worked that are consistent with the presence of complementarities in working hours. Next, we estimate the elasticity of substitution in working hours and find it to be 0.69 in the aggregate and between 0.52 and 1.04 across industries. We validate our elasticity estimates by showing that industries with higher elasticities exhibit greater flexibility in hours. Our results suggest that working hours are gross complements in production rather than perfect substitutes, as is typically assumed. An accounting exercise using our model estimations suggests that hours-wage penalties, due to complementarities in hours, can explain 5 to 30 percent of the gender wage gap over the life-cycle.

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  • Shao, Lin & Sohail, Faisal & Yurdagul, Emircan, 2022. "Are Working Hours Complements in Production?," CEPR Discussion Papers 17311, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:17311
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    Cited by:

    1. Yurdagul, Emircan & Adamopoulou, Effrosyni & Manaresi, Francesco & Rachedi, Omar, 2021. "Minimum Wages and Insurance within the Firm," CEPR Discussion Papers 16823, C.E.P.R. Discussion Papers.
    2. Shao, Lin & Sohail, Faisal & Yurdagul, Emircan, 2022. "Labor Supply and Firm Size," CEPR Discussion Papers 17469, C.E.P.R. Discussion Papers.
    3. Kuhn, Moritz & Luo, Jinfeng & Manovskii, Iourii & Qiu, Xincheng, 2023. "Coordinated firm-level work processes and macroeconomic resilience," Journal of Monetary Economics, Elsevier, vol. 137(C), pages 107-127.
    4. He, Fan & Zeng, Xin & Xue, Jingwen & Xu, Jianbin, 2024. "The hidden cost of corporate tax cuts: Evidence from worker health in China," China Economic Review, Elsevier, vol. 86(C).
    5. Sztachera, Maciej, 2024. "Hours, wages, and multipliers," MPRA Paper 121556, University Library of Munich, Germany.

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    More about this item

    Keywords

    Labor supply; Complementarities; Wages; Production; Flexibility; Coordination;
    All these keywords.

    JEL classification:

    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • 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
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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