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Working Hours Reduction and Endogenous Growth

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Abstract

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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  • Chun-chieh Huang & Ching-chong Lai & Juin-jen Chang, 2004. "Working Hours Reduction and Endogenous Growth," IEAS Working Paper : academic research 04-A006, Institute of Economics, Academia Sinica, Taipei, Taiwan.
    • Handle: RePEc:sin:wpaper:04-a006
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    Working hours reduction; Endogenous growth;

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