Since the recent financial resulted in high unemployment rates in most European countries, there is rising discussion whether shorter working hours can be a policy instrument to generate employment. In the theoretical literature, no clear-cut relationships between shorter hours and economic variables of interest such as employment, wages and labour supply can be obtained. The empirical literature is divided as well, especially regarding the question of the employment effects of shorter working hours. The thesis aims to add to the existing macroeconometric literature in two ways: The first is to use not average hours of everyone employed, but of those fully employed. The second is to control for cross-section dependence in the econometric set-up. The empirical analysis uses a three-equation ARDL model including the variables working hours, employment, wages, and the control variables GDP per capita and the share of persons in working age. The long-run elasticities show the following results: working hours fall with rising wages and falling employment. As for wages, longer average hours of those fully employed result in lower wages. The estimates for the employment equation suggest that a fall of working hours of those fully employed leads to a (under-proportional) rise in employment. Rising wages are found to result in a rising employment rate.
|Published - 2015