Scandinavian Working Papers in Economics
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IFAU - Institute for Evaluation of Labour Market and Education Policy Working Paper Series
IFAU - Institute for Evaluation of Labour Market and Education Policy

No 2001:8:
The effects of working time reductions on wages, actual hours and equilibrium unemployment

Oskar Nordström Skans ()

Abstract: This paper extends a general equilibrium model of unemployment and working hours and evaluates the model on a 5 percent working time reduction for shift workers in Sweden. Panel data from firms' payroll records are used to examine the relationship between standard hours, actual hours and hourly wages. The main results are: i) Actual hours only decreased by 40 percent of the reduction in standard hours. ii) Hourly wages for shift workers rose relative to wages for daytime workers. iii) The wage increase was more pronounced for workers who received a larger reduction of actual hours. The conclusion is that working time reductions that allow for discretion on lower levels of bargaining do not necessarily reduce actual hours. Furthermore, working time reductions may result in an increase in wage pressure, causing unemployment to rise.

Keywords: Work sharing; working hours; unemployment; wage pressure; (follow links to similar papers)

JEL-Codes: E24; J22; J23; J51; (follow links to similar papers)

42 pages, July 12, 2001

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This paper is published as:
Nordström Skans, Oskar, (2004), 'The impact of working-time reductions on actual hours and wages -Evidence from Swedish register-data', Labour Economics, Vol. 11, October, No. 5, pages 647-665

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