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Working-week flexibility: Implications for employment and productivity


  • Osuna, Victoria


This paper evaluates the implications for employment, productivity and wages of allowing for more flexibility in weekly hours worked introduced in the recent Spanish labour market reform (the 2012 reform). A crucial aspect of the model will be the extent to which firms will be able to choose the workweek when subject to demand shocks. The model is calibrated so that it reproduces the cross-sectional distribution of workweeks across plants and households and some features of the Spanish economy. The author compares the status quo steady-state, where a 40 hour workweek is imposed and no flexibility is allowed, with the steady state of economies with a higher degree of flexibility in weekly hours: the 2012 Reform, the Work sharing and the Full flexibility scenarios. She finds that the 2012 reform preserves employment and generates a 1.72% increase in productivity. In the work sharing scenario, the increase in employment (1.86%) comes at the expense of a lower productivity increase (1.31%) and a decrease in weekly hours worked (4%). Finally, the full flexibility scenario preserves employment and generates a substantial increase in productivity (2.6%) by allowing firms to completely adapt to changing economic conditions, by expanding or contracting the working week.

Suggested Citation

  • Osuna, Victoria, 2013. "Working-week flexibility: Implications for employment and productivity," Economics Discussion Papers 2013-27, Kiel Institute for the World Economy (IfW).
  • Handle: RePEc:zbw:ifwedp:201327

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    References listed on IDEAS

    1. Hansen, Gary D., 1985. "Indivisible labor and the business cycle," Journal of Monetary Economics, Elsevier, vol. 16(3), pages 309-327, November.
    2. Samuel Bentolila & Juan J. Dolado & Pierre Cahuc & Thomas Le Barbanchon, 2010. "Two-Tier Labor Markets in the Great Recession: France Vs. Spain," Working Papers wp2010_1009, CEMFI.
    3. Tito Boeri & J. Ignacio Conde-Ruiz & Vincenzo Galasso, 2012. "The Political Economy Of Flexicurity," Journal of the European Economic Association, European Economic Association, vol. 10(4), pages 684-715, August.
    4. Rogerson, Richard, 1988. "Indivisible labor, lotteries and equilibrium," Journal of Monetary Economics, Elsevier, vol. 21(1), pages 3-16, January.
    5. Eva Ortega, "undated". "The Spanish business cycle and its relationship to Europe," Studies on the Spanish Economy 09, FEDEA.
    6. James Costain & Juan F. Jimeno & Carlos Thomas, 2010. "Employment fluctuations in a dual labour market," Economic Bulletin, Banco de España;Economic Bulletin Homepage, issue APR, April.
    7. Victoria Osuna & Jose-Victor Rios-Rull, 2003. "Implementing the 35 Hour Workweek by Means of Overtime Taxation," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 6(1), pages 179-206, January.
    8. Prescott, Edward C. & Rios-Rull, Jose-Victor, 1992. "Classical competitive analysis of economies with Islands," Journal of Economic Theory, Elsevier, vol. 57(1), pages 73-98.
    9. Ignacio García Pérez, J. & Osuna, Victoria, 2014. "Dual labour markets and the tenure distribution: Reducing severance pay or introducing a single contract," Labour Economics, Elsevier, vol. 29(C), pages 1-13.
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    More about this item


    workweek; wages; employment; productivity;

    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
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure

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