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The 40-Hour Work Week

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  • Eunseong Ma

    (Yonsei University)

Abstract

Approximately half of U.S. employees adhere to the constraints of the traditional 40-hour work week. This study examines implications of this standardized work schedule. To this end, a novel heterogeneous-agent model is developed, incorporating a wage penalty function faced by households when working fewer hours than a specific threshold. The calibrated model captures the salient features of the empirical distribution of hours worked, with a notable spike at the 40-hour mark. The study reveals the 40-hour work week as a critical determinant of both micro and macro labor supply elasticities. It yields a small micro elasticity with heterogeneity across households, while the macro elasticity is larger, making the extensive margin more influential. Moreover, the 40-hour work week plays a significant role in shaping earnings inequality over the business cycle. Ultimately, this paper uncovers the vulnerability of households constrained by this work schedule to the adverse effects of business cycle fluctuations.

Suggested Citation

  • Eunseong Ma, 2024. "The 40-Hour Work Week," Working papers 2024rwp-225, Yonsei University, Yonsei Economics Research Institute.
    • Handle: RePEc:yon:wpaper:2024rwp-225
    as

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    References listed on IDEAS

    as
    1. Den Haan, Wouter J., 2010. "Assessing the accuracy of the aggregate law of motion in models with heterogeneous agents," Journal of Economic Dynamics and Control, Elsevier, vol. 34(1), pages 79-99, January.
    2. Raj Chetty & John N. Friedman & Tore Olsen & Luigi Pistaferri, 2011. "Adjustment Costs, Firm Responses, and Micro vs. Macro Labor Supply Elasticities: Evidence from Danish Tax Records," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 126(2), pages 749-804.
    3. repec:pri:wwseco:dp235 is not listed on IDEAS
    4. repec:pri:wwseco:dp235.pdf is not listed on IDEAS
    5. Schoefer, Benjamin & Mui, Preston, 2019. "Reservation Raises: The Aggregate Labor Supply Curve at the Extensive Margin," CEPR Discussion Papers 14209, C.E.P.R. Discussion Papers.
    6. Sam Schulhofer-Wohl, 2008. "Heterogeneous Risk Preferences and the Welfare Cost of Business Cycles," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(4), pages 761-780, October.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    40-hour work week; labor supply elasticity; wage penalty function; welfare effect of business cycles;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply

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