Working-Time Regulation, Firm Heterogeneity, and Efficiency

Javier Ortega

No 3736, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: A labour-matching economy with ex post heterogeneous firms is presented. When bargaining over the wage, firms and workers do not know the level of product demand. Once demand is realized, hours of work are chosen. We show that the existence of a legal workweek may enhance efficiency with respect to laissez-faire: while laissez-faire is good at allocating hours across firms, regulation may be better at reproducing optimal hours. Shortening the legal workweek raises employment and is Pareto-improving if and only if the demand faced by low-demand firms and/or the overtime premium are small enough.

Keywords: Efficiency; Unemployment; Working-time; Work-sharing (search for similar items in EconPapers)
JEL-codes: E24 J22 J23 J30 J41 (search for similar items in EconPapers)
Date: 2003-02
References: Add references at CitEc
Citations: View citations in EconPapers (9)

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