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Hours of Work: A Demand Perspective

Author

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  • Robert Dixon
  • John Freebairn

Abstract

In Australia, and in other countries, we observe at any one time a wide distribution of hours worked per week. We develop a cost-minimising model to explain employer choices over the number of employees and their hours of work. An important finding is that hours of work and the number of employees are not perfect substitutes. We show that this has important implications for the way economists model labour demand and measure productivity. We show that estimates using total hours worked as the measure of labour input implicitly assumes perfect substitution of persons and hours and results, inter alia, in an overestimation of the rate of labour and multifactor productivity growth in Australia and especially in the period prior to the so called ‘productivity slow-down’.

Suggested Citation

  • Robert Dixon & John Freebairn, 2007. "Hours of Work: A Demand Perspective," Department of Economics - Working Papers Series 1022, The University of Melbourne.
  • Handle: RePEc:mlb:wpaper:1022
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    File URL: http://fbe.unimelb.edu.au/__data/assets/pdf_file/0009/802845/1022.pdf
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    References listed on IDEAS

    as
    1. David M. Cutler & Brigitte C. Madrian, 1998. "Labor Market Responses to Rising Health Insurance Costs: Evidence on Hours Worked," RAND Journal of Economics, The RAND Corporation, vol. 29(3), pages 509-530, Autumn.
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    3. Bell, David N F, 1982. "Labour Utilization and Statutory Non-Wage Costs," Economica, London School of Economics and Political Science, vol. 49(195), pages 335-343, August.
    4. M. S. Feldstein, 1967. "Specification of the Labour Input in the Aggregate Production Function," Review of Economic Studies, Oxford University Press, vol. 34(4), pages 375-386.
    5. Calmfors, Lars & Hoel, Michael, 1989. "Work Sharing, Employment and Shiftwork," Oxford Economic Papers, Oxford University Press, vol. 41(4), pages 758-773, October.
    6. Gary S. Becker, 1962. "Investment in Human Capital: A Theoretical Analysis," Journal of Political Economy, University of Chicago Press, vol. 70, pages 1-9.
    7. 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 428-436, December.
    8. Hart,Robert A. & Kawasaki,Seiichi, 1999. "Work and Pay in Japan," Cambridge Books, Cambridge University Press, number 9780521577724.
    9. Ana Paula Martins, 2004. "The Employment-Hours Trade-off: Theory and an Application to the Portuguese Case," LABOUR, CEIS, vol. 18(3), pages 465-502, September.
    10. Guy Debelle & James Vickery, 1998. "The Macroeconomics of Australian Unemployment," RBA Annual Conference Volume,in: Guy Debelle & Jeff Borland (ed.), Unemployment and the Australian Labour Market Reserve Bank of Australia.
    11. Dean Parham, 2004. "Sources of Australia's Productivity Revival," The Economic Record, The Economic Society of Australia, vol. 80(249), pages 239-257, June.
    12. Russell, Bill & Tease, Warren, 1991. "Employment, Output and Real Wages," The Economic Record, The Economic Society of Australia, vol. 67(196), pages 34-45, March.
    13. F. P. R. Brechling, 1965. "The Relationship between Output and Employment in British Manufacturing Industries," Review of Economic Studies, Oxford University Press, vol. 32(3), pages 187-216.
    14. Robert Dixon & John Freebairn & G.C. Lim, 2005. "An Employment Equation for Australia," The Economic Record, The Economic Society of Australia, vol. 81(254), pages 204-214, September.
    15. Calmfors, Lars & Hoel, Michael, 1988. " Work Sharing and Overtime," Scandinavian Journal of Economics, Wiley Blackwell, vol. 90(1), pages 45-62.
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    More about this item

    Keywords

    Employment; Hours; Production Function; Total Factor Productivity;

    JEL classification:

    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity

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