Reduction of working time and unemployment

Abstract

This paper analyzes the consequences of compulsory reductions in working time on employment. The first part of the paper is devoted to the analysis of labor demand when the firm chooses the number of jobs and hours. This framework allows us to show that compulsory reductions in standard hours can increase employment only if wage compensation is sufficiently low. Then, the second part of the paper looks at the determinants of wages, hours and employment in different frameworks: perfect competition, collective bargaining, monopsony. It is shown that regulation of hours is justified and can even increase employment when competition is imperfect. However, compulsory reductions in working hours cannot systematically improve employment and welfare.working time; work sharing