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Working long hours: less productive but less costly? Firm-level evidence from Belgium

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Listed:
  • Françoise Delmez

    (University of Namur, Economics Department)

  • Vincent Vandenberghe

    (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES))

Abstract

From the point of view of a profit-maximizing firm, the optimal number of working hours depends not only on the marginal productivity of hours but also on the marginal labour cost. This paper develops and assesses empirically a simple model of firms' decision making where productivity varies with hours and where the firm faces labour costs per worker that are invariant to the number of hours worked: i.e. quasi-fixed labour costs. Using Belgian firm-level data on production, labour costs, workers and hours, and focusing of the estimation of workers/hours elasticities of isoquant and isocost, we find evidence of the declining productivity of hours, but also of quasi-fixed labour costs in the range of 20% of total labour costs. We also show that industries with larger estimated quasi-fixed labour costs display higher annual working hours and make less use of part-time contracts. The tentative conclusion is that firms facing large quasi-fixed labour costs are enticed to raise working hours (or oppose their reduction), even if this results in lower labour productivity.

Suggested Citation

  • Françoise Delmez & Vincent Vandenberghe, 2017. "Working long hours: less productive but less costly? Firm-level evidence from Belgium," LIDAM Discussion Papers IRES 2017022, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  • Handle: RePEc:ctl:louvir:2017022
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    File URL: https://sites.uclouvain.be/econ/DP/IRES/2017022.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    men vs hours; working hours; imperfect substitutability; labour costs;
    All these keywords.

    JEL classification:

    • 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
    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General

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