Working time reductions and monopsony power

Antoine Germain ()
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Antoine Germain: Université catholique de Louvain, LIDAM/CORE, Belgium

No 2025010, LIDAM Discussion Papers CORE from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE)

Abstract: This paper studies the consequences of working time reductions when labor markets may be monopsonistic. A toy model shows that the marginal utility of a small working time reduction is negative when workers control schedules but positive when firms set hours. However, the policy increases wage rates in perfect competition but decreases monopsonistic wage rates. I test these predictions empirically by evaluating the first-ever working time reduction in Belgium: the maximum 9h workday in 1910’s coal mines. I find that the policy had sizable negative effects on profits, employment and earnings. To assess welfare, I build a directed search model with matching frictions where firms have heterogeneous productivity and post wages and hours. Utilitarian welfare is expressed in terms of a sufficient statistic whose application to the 1910 reform suggests that the value of leisure was particularly large.

Pages: 44
Date: 2025-05-28
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Persistent link: https://EconPapers.repec.org/RePEc:cor:louvco:2025010

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