Market Work, Home Production, Consumer Demand and Unemployment Among the Unskilled

Economic Modelling, Vol. 27, pp. 67-82, 2010

MEA Discussion Paper No. 101-06

36 Pages Posted: 30 Jan 2009 Last revised: 19 Mar 2014

See all articles by Melanie Lührmann

Melanie Lührmann

University of Mannheim - Mannheim Research Institute for the Economics of Aging (MEA)

Matthias Weiss

MEA, Max Planck Institute for Social Law and Social Policy; Maastricht University - Research Centre for Education and the Labour Market (ROA)

Date Written: January 1, 2006

Abstract

This paper introduces a new argument into the theoretical literature on labor market effects of changes in working hours and labor force participation. We advance a general equilibrium model in which increased labor supply reduces unskilled unemployment via consumer demand: longer work hours and higher labor force participation imply higher incomes and less (leisure) time. In consequence, home production is reduced in favor of outsourcing domestic tasks to the market, shifting consumer demand toward unskill-intensive goods. Relative demand for unskilled labor rises and unemployment falls. Finally, we provide empirical support for the basic mechanisms of our model for Germany.

Keywords: Working Time Reduction, Labor Force Participation, Low Skill Unemployment, Home Production, Time Use

JEL Classification: J22, J23, E21, E24

Suggested Citation

Lührmann, Melanie and Weiss, Matthias, Market Work, Home Production, Consumer Demand and Unemployment Among the Unskilled (January 1, 2006). Economic Modelling, Vol. 27, pp. 67-82, 2010; MEA Discussion Paper No. 101-06. Available at SSRN: https://ssrn.com/abstract=1335369 or http://dx.doi.org/10.2139/ssrn.1335369

Melanie Lührmann

University of Mannheim - Mannheim Research Institute for the Economics of Aging (MEA) ( email )

D-68131 Mannheim
Germany

Matthias Weiss (Contact Author)

MEA, Max Planck Institute for Social Law and Social Policy ( email )

Amalienstraße 33
München, 80799
Germany
+49 89 38602 358 (Phone)
+49 89 38602 390 (Fax)

HOME PAGE: http://www.mea.mpisoc.mpg.de/

Maastricht University - Research Centre for Education and the Labour Market (ROA) ( email )

P.O. Box 616
Maastricht, MD6200
Netherlands

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