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Hours of Work: A Demand Perspective

Author

Listed:
  • 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

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    More about this item

    Keywords

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    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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