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Labor Market Responses to Legal Work Hour Reduction: Evidence from Japan

Daiji Kawaguchi (), Hisahiro Naito and Izumi Yokoyama ()

ESRI Discussion paper series from Economic and Social Research Institute (ESRI)

Abstract: Japan's labor standard law defines weekly legal work hours, and employers must pay a 25- percent wage premium for overtime. The number of legal work hours was 48 in 1987 and gradually declined to 40 by 1997. During the corresponding period, the average weekly hours of work dropped from 45 to 41, suggesting the causal effect of legal regulation on the actual hours of work. Exploiting the different timing of the regulation change by industry and establishment size, this paper estimates the causal impact of legal work hour restriction on actual hours worked. The analysis results indicate that a one-hour reduction of legal work hours led to a reduction of 0.14 actual hours worked, but it was not accompanied by a reduction in monthly cash earnings. The recruitment of new school graduates was suppressed in response to an increase in the hourly wage rate.

Pages: 34 pages
Date: 2008-12
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