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Department of Economics, Aarhus School of Business, University of Aarhus Working Papers, Department of Economics, Aarhus School of Business, University of Aarhus

No 10-4:
Work Hours, Social Value of Leisure and Globalisation

Jørgen Drud Hansen (), Hassan Molana, Catia Montagna and Jørgen Ulff-Møller Nielsen ()

Abstract: We examine how openness interacts with the coordination of consumption-leisure decisions in determining the equilibrium working hours and wage rate when there are leisure externalities (e.g., due to social interactions). The latter are modelled by allowing a workers marginal utility of leisure to be increasing in the leisure time taken by other workers. Coordination takes the form of internalising the leisure externality and other relevant constraints (e.g., labour demand). The extent of openness is measured by the degree of capital mobility. We find that: coordination lowers equilibrium work hours and raises the wage rate; there is a U-shaped (inverse-U-shaped) relationship between work hours (wages) and the degree of coordination; coordination is welfare improving; and, the gap between the coordinated and uncoordinated work hours (and the corresponding wage rates) is affected by the extent and nature of openness.

Keywords: coordination; corporatism; openness; capital mobility; social multiplier; welfare; work hours; (follow links to similar papers)

JEL-Codes: F20; J20; J50; (follow links to similar papers)

32 pages, January 1, 2010

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