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Reduction of Working Time: Does it Decrease Unemployment?

Author

Listed:
  • Axel Börsch-Supan

    () (Munich Center for the Economics of Aging (MEA))

Abstract

Over and again, the reduction of working time is praised as the instrument against unemployment in Europe. While the first round argument appears obvious – less work for some will create more work for others – second round repercussions, such as consequential labor cost increases, put doubt on the validity of the argument. As frequently, empirical evidence would be helpful to shed light on this important debate. This paper reviews the theoretical arguments and the empirical evidence on the effects of reduced weekly working time on unemployment. Given the prominence in the European popular discussion, the scientific literature is astoundingly thin on the topic. The main findings can be summarized as follows: There are theoretical arguments that can form the basis for a positive effect on employment in response to a reduction in working time. However, they rest on strong assumptions that appear counterfactual. Econometric studies show little or negative effects on employment in Germany. Only a set of simulation studies predicts a positive employment effect – but again, they appear to rest on counterfactual assumptions. Hence, while the reduction of work hours may have increased workers’ utility – a legitimate goal of the unions – it does not appear to be justified as a cure against unemployment.

Suggested Citation

  • Axel Börsch-Supan, 2002. "Reduction of Working Time: Does it Decrease Unemployment?," MEA discussion paper series 02003, Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy.
  • Handle: RePEc:mea:meawpa:02003
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    References listed on IDEAS

    as
    1. Jennifer Hunt, 1996. "The Response of Wages and Actual Hours Worked to the Reduction of Standard Hours in Germany," Discussion Papers of DIW Berlin 138, DIW Berlin, German Institute for Economic Research.
    2. Toedter, Karl-Heinz, 1988. "Effects of shorter hours on employment in disequilibrium models," European Economic Review, Elsevier, vol. 32(6), pages 1319-1333, July.
    3. Jennifer Hunt, 1999. "Has Work-Sharing Worked in Germany?," The Quarterly Journal of Economics, Oxford University Press, vol. 114(1), pages 117-148.
    4. 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.
    5. Borsch-Supan, Axel & Schnabel, Reinhold, 1998. "Social Security and Declining Labor-Force Participation in Germany," American Economic Review, American Economic Association, vol. 88(2), pages 173-178, May.
    6. Alan S. Blinder, 1994. "On Sticky Prices: Academic Theories Meet the Real World," NBER Chapters,in: Monetary Policy, pages 117-154 National Bureau of Economic Research, Inc.
    7. Konig, Heinz & Pohlmeier, Winfried, 1988. "Employment, Labour Utilization and Procyclical Labour Productivity," Kyklos, Wiley Blackwell, vol. 41(4), pages 551-572.
    8. Entorf, Horst & Konig, Heinz & Pohlmeier, Winfried, 1992. " Labor Utilization and Nonwage Labor Costs in a Disequilibrium Macro Framework," Scandinavian Journal of Economics, Wiley Blackwell, vol. 94(1), pages 71-83.
    9. Anil K Kashyap, 1995. "Sticky Prices: New Evidence from Retail Catalogs," The Quarterly Journal of Economics, Oxford University Press, vol. 110(1), pages 245-274.
    10. Jonathan Gruber & David A. Wise, 1999. "Social Security and Retirement around the World," NBER Books, National Bureau of Economic Research, Inc, number grub99-1, January.
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Is work sharing an answer for high unemployment?
      by James Pethokoukis in AEIdeas on 2012-06-13 20:15:00

    More about this item

    JEL classification:

    • Z00 - Other Special Topics - - General - - - General

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