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Working Hours Reduction and Endogenous Growth

This paper formulates an endogenous growth model and uses it to inquire into the long-run impact of work-sharing arrangements on economic growth. We show that the styles of wage contract, namely salary-style and hourly-style contracts, are a key factor in determining the long-run growth effects of working time reduction. If the labor market is overwhelmingly salaried arrangement, then the extent of wage flexibility is relatively low; as a consequence, a policy of reducing working hours will deteriorate economic growth. On the contrary, if hourly pay predominates, then the wage system tends to increase the degree of wage flexibility. Thus, a cut in working time may favor the economy’s growth rate.

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File URL: http://www.econ.sinica.edu.tw/upload/file/04-a006.2008090210140946.pdf
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Paper provided by Institute of Economics, Academia Sinica, Taipei, Taiwan in its series IEAS Working Paper : academic research with number 04-A006.

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Length: 16 pages
Date of creation: Feb 2004
Date of revision:
Handle: RePEc:sin:wpaper:04-a006
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Web page: http://www.econ.sinica.edu.tw/index.php?foreLang=en
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  13. Jones, Larry E & Manuelli, Rodolfo E & Rossi, Peter E, 1993. "Optimal Taxation in Models of Endogenous Growth," Journal of Political Economy, University of Chicago Press, vol. 101(3), pages 485-517, June.
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  31. Turnovsky, Stephen J., 1996. "Fiscal policy, growth, and macroeconomic performance in a small open economy," Journal of International Economics, Elsevier, vol. 40(1-2), pages 41-66, February.
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