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Reduction of working hours as a policy of work sharing in the face of an economic crisis

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  • E. Dominguez
  • M. Ullibarri
  • I. Zabaleta

Abstract

In times of economic crisis, with a high unemployment rate expected to continue rising, governments such as those of the European countries which establish the number of hours to be worked can share out work by reducing the length of the working week. This article constructs a general equilibrium model in which the effects of reduction in working hours on the main macroeconomic variables are studied. To do so, the model includes two important new features with regard to the production function: a parameter measuring the productivity of working hours and another parameter of adjustment costs measuring the unproductive time in the course of the working day. Results show that the employment level always improves as the length of the working week is reduced but also reveal an inflection point in terms of the productivity of working hours, below which a reduction in the number of working hours improves the results of macroeconomic variables and above which this policy aggravates the economic situation.

Suggested Citation

  • E. Dominguez & M. Ullibarri & I. Zabaleta, 2011. "Reduction of working hours as a policy of work sharing in the face of an economic crisis," Applied Economics Letters, Taylor & Francis Journals, vol. 18(7), pages 683-686.
    • Handle: RePEc:taf:apeclt:v:18:y:2011:i:7:p:683-686
    DOI: 10.1080/13504851.2010.485924
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    References listed on IDEAS

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    1. Terry J. Fitzgerald, 1998. "Reducing working hours: a general equilibrium analysis," Working Papers (Old Series) 9801, Federal Reserve Bank of Cleveland.
    2. Casey B. Mulligan, 1998. "Microfoundations and macro implications of indivisible labor," Discussion Paper / Institute for Empirical Macroeconomics 126, Federal Reserve Bank of Minneapolis.
    3. Alison Booth & Martin Ravallion, 1993. "Employment and Length of the Working Week in a Unionized Economy in which Hours of Work Influence Productivity," The Economic Record, The Economic Society of Australia, vol. 69(4), pages 428-436, December.
    4. Marimon, Ramon & Zilibotti, Fabrizio, 2000. "Employment and distributional effects of restricting working time," European Economic Review, Elsevier, vol. 44(7), pages 1291-1326, June.
    5. FitzRoy, Felix R. & Funke, Michael & Nolan, Michael A., 2002. "Working time, taxation and unemployment in general equilibrium," European Journal of Political Economy, Elsevier, vol. 18(2), pages 333-344, June.
    6. Booth, Alison & Ravallion, Martin, 1993. "Employment and Length of the Working Week in a Unionized Economy in which Hours of Work Influence Productivity," The Economic Record, The Economic Society of Australia, vol. 69(207), pages 428-436, December.
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    Cited by:

    1. Lonnie Golden & Stuart Glosser, 2013. "Work sharing as a potential policy tool for creating more and better employment: A review of the evidence," Chapters, in: Jon C. Messenger & Naj Ghosheh (ed.), Work Sharing during the Great Recession, chapter 7, pages 203-258, Edward Elgar Publishing.
    2. Zwickl, Klara & Disslbacher, Franziska & Stagl, Sigrid, 2016. "Work-sharing for a sustainable economy," Ecological Economics, Elsevier, vol. 121(C), pages 246-253.
    3. Arvind Ashta, 2017. "Work-sharing from Different Angles: A literature review," Working Papers CEB 17-033, ULB -- Universite Libre de Bruxelles.
    4. Klara Zwickl & Franziska Disslbacher & Sigrid Stagl, 2016. "Work-sharing for a Sustainable Economy. WWWforEurope Working Paper No. 111," WIFO Studies, WIFO, number 58684.

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