Jørgen Drud Hansen
(), Hassan Molana
, Catia Montagna
and Jørgen Ulff-Møller Nielsen
Jørgen Drud Hansen: Department of Economics, Aarhus School of Business, Postal: The Aarhus School of Business, Aarhus University, Department of Economics, Frichshuset Hermodsvej 22, 8230 Åbyhøj, Denmark
Hassan Molana: University of Dundee
Catia Montagna: University of Dundee
Jørgen Ulff-Møller Nielsen: Department of Economics, Aarhus School of Business, Postal: The Aarhus School of Business, Aarhus University, Department of Economics, Frichshuset Hermodsvej 22, 8230 Åbyhøj, Denmark
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.
32 pages, January 1, 2010
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