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Employment and distributional effects of restricting working time

Employment and distributional effects of restricting working time
Employment and distributional effects of restricting working time
We study the employment and distributional effects of regulating (reducing) working time in a general equilibrium model with search-matching frictions. Job creation entails fixed costs, but existing jobs are subject to diminishing returns. We characterize the equilibrium in the de-regulated economy where firms and individual workers freely negotiate wages and hours. Then, we consider the effects of a legislation restricting the maximum working time, while we let wages respond endogenously. Employment effects are sensitive to the representation of preferences. In our benchmark, small reductions in working time, starting from the laissez-faire equilibrium solution, always result in a small increase in the equilibrium employment, while larger reductions reduce employment. The regulation benefits workers, both unemployed and employed (even if wages decrease and even in cases where employment falls), but reduces profits and output
hours reduction, leisure, search, unemployment, wage, working time, work sharing
0014-2921
1291-1326
Marimon, Ramon
36f3bac5-05a2-411e-b345-79580d8a3b90
Zilibotti, Fabrizio
4e5e129e-cb11-4b09-8ba4-ce400e638712
Marimon, Ramon
36f3bac5-05a2-411e-b345-79580d8a3b90
Zilibotti, Fabrizio
4e5e129e-cb11-4b09-8ba4-ce400e638712

Marimon, Ramon and Zilibotti, Fabrizio (2000) Employment and distributional effects of restricting working time. European Economic Review, 44 (7), 1291-1326. (doi:10.1016/S0014-2921(00)00032-5).

Record type: Article

Abstract

We study the employment and distributional effects of regulating (reducing) working time in a general equilibrium model with search-matching frictions. Job creation entails fixed costs, but existing jobs are subject to diminishing returns. We characterize the equilibrium in the de-regulated economy where firms and individual workers freely negotiate wages and hours. Then, we consider the effects of a legislation restricting the maximum working time, while we let wages respond endogenously. Employment effects are sensitive to the representation of preferences. In our benchmark, small reductions in working time, starting from the laissez-faire equilibrium solution, always result in a small increase in the equilibrium employment, while larger reductions reduce employment. The regulation benefits workers, both unemployed and employed (even if wages decrease and even in cases where employment falls), but reduces profits and output

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More information

Published date: 2000
Additional Information: JEL classification codes: E24, E25, J22, J23, J30, J41
Keywords: hours reduction, leisure, search, unemployment, wage, working time, work sharing

Identifiers

Local EPrints ID: 33082
URI: https://eprints.soton.ac.uk/id/eprint/33082
ISSN: 0014-2921
PURE UUID: c6b29efd-3496-426b-ad7f-79e99a4e6513

Catalogue record

Date deposited: 17 Jul 2006
Last modified: 17 Jul 2017 15:54

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