Working-Time Regulation, Firm Heterogeneity, and Efficiency

31 Pages Posted: 18 Mar 2003

See all articles by Javier Ortega

Javier Ortega

Kingston University London; London School of Economics & Political Science (LSE) - Department of Government; Institute for the Study of Labor (IZA); University College London - CReAM - Centre for Research and Analysis of Migration

Date Written: February 2003

Abstract

A labour-matching economy with ex post heterogeneous firms is presented. When bargaining over the wage, firms and workers do not know the level of product demand. Once demand is realized, hours of work are chosen. We show that the existence of a legal workweek may enhance efficiency with respect to laissez-faire: while laissez-faire is good at allocating hours across firms, regulation may be better at reproducing optimal hours. Shortening the legal workweek raises employment and is Pareto-improving if and only if the demand faced by low-demand firms and/or the overtime premium are small enough.

Keywords: Efficiency, unemployment, working-time, work-sharing

JEL Classification: E24, J22, J23, J30, J41

Suggested Citation

Ortega, Javier, Working-Time Regulation, Firm Heterogeneity, and Efficiency (February 2003). Available at SSRN: https://ssrn.com/abstract=388800

Javier Ortega (Contact Author)

Kingston University London ( email )

Penrhyn road
London, KT1 2EE
United Kingdom

London School of Economics & Political Science (LSE) - Department of Government

United Kingdom

Institute for the Study of Labor (IZA)

P.O. Box 7240
Bonn, D-53072
Germany

University College London - CReAM - Centre for Research and Analysis of Migration ( email )

Drayton House
30 Gordon Street
London, WC1H 0AX
United Kingdom

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