Can Work-Sharing Work?

Posted: 26 Jul 2000

See all articles by David M. Spector

David M. Spector

University of Angers - Centre d'Etudes Prospectives d'Economie Mathematique Appliquees a la Planification (CEPREMAP)

Date Written: October 1999

Abstract

This paper assesses the effectiveness of work-sharing as a tool against unemployment, within a simple model where unemployment is induced by a binding minimum wage. To be effective, policies such as working time reduction or early retirement require that the workforce be homogeneous enough: The unemployed can then easily replace the freed up hours of work. We calculate the effects of work-sharing and of classical payroll tax reduction policies, as a function of some homogeneity measure and of the relevant elasticities. On the basis of existing empirical results, we estimate that in France, 2.5 hours of work must be removed to free up one hour of work: labor force heterogeneity makes work-sharing much less effective than a naive analysis would predict, and payroll tax reductions are more cost-effective than work-sharing with income compensation.

JEL Classification: E24, J21, J23, J31, J38

Suggested Citation

Spector, David M., Can Work-Sharing Work? (October 1999). MIT Department of Economics Working Paper No. 99-21. Available at SSRN: https://ssrn.com/abstract=195737

David M. Spector (Contact Author)

University of Angers - Centre d'Etudes Prospectives d'Economie Mathematique Appliquees a la Planification (CEPREMAP)

Ecole Normale Superieure
48 boulevard Jourdan
75014 Paris
France

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