Worker Productivity, Working Time Reduction, And The Short–Run And Long–Run Employment Effects

This paper illustrates a shirking–type efficiency wage model to explain why shorter working hours cause an ambiguous effect on employment as the empirical result. We find that shorter working hours have an uncertain impact on the work effort, and the relationship between work effort and shorter working time is a decisive factor in the employment effect of working time reduction. Moreover, it is also found that, given the zero profit constraint, the long–run employment effect of reducing working hours will intensify the short–run employment effect.