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Designing the Optimal Length of Working Time


  • Carlo Altavilla

    () (CELPE University of Salerno, University of Naples Parthenope)

  • Antonio Garofalo

    () (CELPE University of Salerno, University of Naples Parthenope)

  • Concetto Paolo Vinci

    () (CELPE,University of Salerno)


How many hours per week should workers in the United States and Germany spend at their paying jobs? The present paper addresses this question by constructing policymakers’ reaction functions capable of modelling the optimal length of working time as a function of the relevant labour market variables. The empirical analysis is based on the optimal control algorithm. Given a policymaker’s loss function and a structural model of the labour market we define alternative specifications of reaction functions where the response coefficients indicate how policymakers should react to any news in the labour market in order to stabilize employment and wages. We also perform a comparative analysis on the ability of the rules to correspond to historical working-time records. The results suggest that simple rules perform quite well and that the advantages obtained from adopting an optimal control-based rule are not so great. Moreover, the analysis emphasizes the success of the wage-based rule and of the employment based rule in the US and Germany, respectively. Finally, we propose a policy rule to capture the dynamics of the weekly working hours. According to our rule the length of the workweek is an inverse function of the deviation between the actual and potential employment level.

Suggested Citation

  • Carlo Altavilla & Antonio Garofalo & Concetto Paolo Vinci, 2005. "Designing the Optimal Length of Working Time," CELPE Discussion Papers 91, CELPE - Centre of Labour Economics and Economic Policy, University of Salerno, Italy.
  • Handle: RePEc:sal:celpdp:91

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    References listed on IDEAS

    1. Becker, Sascha O. & Bentolila, Samuel & Fernandes, Ana & Ichino, Andrea, 2004. "Job Insecurity and Children’s Emancipation," IZA Discussion Papers 1046, Institute for the Study of Labor (IZA).
    2. Manacorda, Marco & Petrongolo, Barbara, 1999. "Skill Mismatch and Unemployment in OECD Countries," Economica, London School of Economics and Political Science, vol. 66(262), pages 181-207, May.
    3. Faini, Riccardo, 1999. "Trade unions and regional development," European Economic Review, Elsevier, vol. 43(2), pages 457-474, February.
    4. Lilien, David M, 1982. "Sectoral Shifts and Cyclical Unemployment," Journal of Political Economy, University of Chicago Press, vol. 90(4), pages 777-793, August.
    5. Pissarides, Christopher A & Wadsworth, Jonathan, 1989. "Unemployment and the Inter-regional Mobility of Labour," Economic Journal, Royal Economic Society, vol. 99(397), pages 739-755, September.
    6. Brunello, Giorgio & Lupi, Claudio & Ordine, Patrizia, 2000. "Regional Disparities and the Italian NAIRU," Oxford Economic Papers, Oxford University Press, vol. 52(1), pages 146-177, January.
    7. Nickell, Stephen & Bell, Brian, 1995. "The Collapse in Demand for the Unskilled and Unemployment across the OECD," Oxford Review of Economic Policy, Oxford University Press, vol. 11(1), pages 40-62, Spring.
    8. Faini, Riccardo & Galli, Giampaolo & Gennari, Pietro & Rossi, Fulvio, 1997. "An empirical puzzle: Falling migration and growing unemployment differentials among Italian regions," European Economic Review, Elsevier, vol. 41(3-5), pages 571-579, April.
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    More about this item


    Policy Rule; Working-time; Dynamic Optimization;

    JEL classification:

    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models

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