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Working long hours: less productive but less costly? Firm-level evidence from Belgium

Françoise Delmez () and Vincent Vandenberghe ()
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Françoise Delmez: University of Namur, Economics Department

No 2017022, Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) from Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES)

Abstract: From the point of view of a profit-maximizing firm, the optimal number of working hours depends not only on the marginal productivity of hours but also on the marginal labour cost. This paper develops and assesses empirically a simple model of firms' decision making where productivity varies with hours and where the firm faces labour costs per worker that are invariant to the number of hours worked: i.e. quasi-fixed labour costs. Using Belgian firm-level data on production, labour costs, workers and hours, and focusing of the estimation of workers/hours elasticities of isoquant and isocost, we find evidence of the declining productivity of hours, but also of quasi-fixed labour costs in the range of 20% of total labour costs. We also show that industries with larger estimated quasi-fixed labour costs display higher annual working hours and make less use of part-time contracts. The tentative conclusion is that firms facing large quasi-fixed labour costs are enticed to raise working hours (or oppose their reduction), even if this results in lower labour productivity.

Keywords: men vs hours; working hours; imperfect substitutability; labour costs (search for similar items in EconPapers)
JEL-codes: J22 J23 C13 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec and nep-eff
Date: 2017-11-17
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Persistent link: https://EconPapers.repec.org/RePEc:ctl:louvir:2017022

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