Are Working Hours Complements in Production?

Lin Shao, Faisal Sohail and Emircan Yurdagul

No 17311, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: This paper studies the degree of complementarity in working hours among coworkers in production. Using matched employer-employee data, we first present facts on the within-establishment relationship between wages and hours worked that are consistent with the presence of complementarities in working hours. Next, we estimate the elasticity of substitution in working hours and find it to be 0.69 in the aggregate and between 0.52 and 1.04 across industries. We validate our elasticity estimates by showing that industries with higher elasticities exhibit greater flexibility in hours. Our results suggest that working hours are gross complements in production rather than perfect substitutes, as is typically assumed. An accounting exercise using our model estimations suggests that hours-wage penalties, due to complementarities in hours, can explain 5 to 30 percent of the gender wage gap over the life-cycle.

Keywords: Labor supply; Complementarities; Wages; Production; Flexibility; Coordination (search for similar items in EconPapers)
JEL-codes: E23 J22 J23 J31 (search for similar items in EconPapers)
Date: 2022-05
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Journal Article: Are working hours complements in production? (2023)
Working Paper: Are Working Hours Complements in Production? (2022)
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