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The effects of working time reductions on wages, actual hours and equilibrium unemployment

This paper extends a general equilibrium model of unemployment and working hours and evaluates the model on a 5 percent working time reduction for shift workers in Sweden. Panel data from firms' payroll records are used to examine the relationship between standard hours, actual hours and hourly wages. The main results are: i) Actual hours only decreased by 40 percent of the reduction in standard hours. ii) Hourly wages for shift workers rose relative to wages for daytime workers. iii) The wage increase was more pronounced for workers who received a larger reduction of actual hours. The conclusion is that working time reductions that allow for discretion on lower levels of bargaining do not necessarily reduce actual hours. Furthermore, working time reductions may result in an increase in wage pressure, causing unemployment to rise.

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File URL: http://www.ifau.se/upload/pdf/se/2001/wp01-8.pdf
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Paper provided by IFAU - Institute for Evaluation of Labour Market and Education Policy in its series Working Paper Series with number 2001:8.

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Length: 42 pages
Date of creation: 12 Jul 2001
Date of revision:
Publication status: Published in Labour Economics, 2004, pages 647-665.
Handle: RePEc:hhs:ifauwp:2001_008
Contact details of provider: Postal: IFAU, P O Box 513, SE-751 20 Uppsala, Sweden
Phone: (+46) 18 - 471 70 70
Fax: (+46) 18 - 471 70 71
Web page: http://www.ifau.se/
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  1. Holmlund, Bertil, 2000. "Labor Taxation in Search Equililbrium with Home Production," Working Paper Series 2000:1, Uppsala University, Department of Economics.
  2. Kapteyn, Arie & Kalwij, Adriaan & Zaidi, Asghar, 2000. "The Myth of Worksharing," IZA Discussion Papers 188, Institute for the Study of Labor (IZA).
  3. Jacobson, Tor & Ohlsson, Henry, 1996. "Working Time, Employment, and Work Sharing: Evidence from Sweden," SSE/EFI Working Paper Series in Economics and Finance 135, Stockholm School of Economics.
  4. Hunt, Jennifer, 1997. "Has Work Sharing Worked in Germany?," CEPR Discussion Papers 1553, C.E.P.R. Discussion Papers.
  5. Imbens, Guido W & Angrist, Joshua D, 1994. "Identification and Estimation of Local Average Treatment Effects," Econometrica, Econometric Society, vol. 62(2), pages 467-75, March.
  6. Calmfors, Lars & Hoel, Michael, 1989. "Work Sharing, Employment and Shiftwork," Oxford Economic Papers, Oxford University Press, vol. 41(4), pages 758-73, October.
  7. Layard, Richard & Nickell, Stephen & Jackman, Richard, 1991. "Unemployment: Macroeconomic Performance and the Labour Market," OUP Catalogue, Oxford University Press, number 9780198284345, March.
  8. Marimon, Ramon & Zilibotti, Fabrizio, 2000. "Employment and distributional effects of restricting working time," European Economic Review, Elsevier, vol. 44(7), pages 1291-1326, June.
  9. Petersen, Trond & Meyerson, Eva & Snartland, Vemund, 1996. "The Within-Job Gender Wage Gap: The Case of Sweden," Working Paper Series 470, Research Institute of Industrial Economics.
  10. Earle, John S & Pencavel, John, 1990. "Hours of Work and Trade Unionism," Journal of Labor Economics, University of Chicago Press, vol. 8(1), pages S150-74, January.
  11. Booth, Alison & Ravallion, Martin, 1993. "Employment and Length of the Working Week in a Unionized Economy in which Hours of Work Influence Productivity," The Economic Record, The Economic Society of Australia, vol. 69(207), pages 428-36, December.
  12. Jennifer Hunt, 1998. "Hours Reductions as Work-Sharing," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 29(1), pages 339-381.
  13. Calmfors, Lars & Hoel, Michael, 1988. " Work Sharing and Overtime," Scandinavian Journal of Economics, Wiley Blackwell, vol. 90(1), pages 45-62.
  14. Aigner, Dennis J., 1973. "Regression with a binary independent variable subject to errors of observation," Journal of Econometrics, Elsevier, vol. 1(1), pages 49-59, March.
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