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Can a Shorter Workweek Induce Higher Employment? Mandatory Reductions in the Workweek and Employment Subsidies

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  • S. Nuri Erbas
  • Chera L. Sayers

Abstract

A reduction in the legal workweek may induce a degree of downward wage flexibility, while an employment subsidy to firms accommodates downward wage rigidity. It may be possible, therefore, to increase employment with a policy that combines a reduction in the workweek with an employment subsidy. In general, however, the long-run employment outcome is ambiguous, and a decline in output cannot be ruled out. More direct policy measures whose impact can be assessed with greater certainty—in particular, removing structural rigidities in the labor market—should be given priority to decrease long term unemployment.

Suggested Citation

  • S. Nuri Erbas & Chera L. Sayers, 1999. "Can a Shorter Workweek Induce Higher Employment? Mandatory Reductions in the Workweek and Employment Subsidies," IMF Working Papers 99/144, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:99/144
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    Cited by:

    1. Altavilla, Carlo & Garofalo, Antonio & Vinci, Concetto Paolo, 2005. "Evaluating the effects of working hours on employment and wages," Journal of Policy Modeling, Elsevier, vol. 27(6), pages 647-664, September.

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