Enhancing Team Productivity through Shorter Working Hours: Evidence from the Great Recession
Jed Devaro and
Discussion papers from Research Institute of Economy, Trade and Industry (RIETI)
When output demand drops during recessions, employers decrease labor inputs by cutting workers and/or hours. If pre-recession hours were excessive, cutting hours might increase labor productivity, given an inverted-U-shaped hours-productivity profile. When total hours decrease in team settings, labor reallocation causes hours to be concentrated among top performers. The adjustment process is examined using single-firm Japanese data on construction design projects. A theoretical model is proposed and calibrated to analyze within-team labor allocation. We find that in response to the decrease in hours resulting from the 2008-2009 global financial crisis: (1) total productivity improves by more than the increase in individual productivity, the labor share becomes more concentrated, and team size decreases; (2) the productivity improvement is greater for larger teams and less productive teams; (3) larger teams exhibit lower average productivity because weaker workers join teams when more hours are needed than the top performers can handle.
Pages: 52 pages
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Persistent link: https://EconPapers.repec.org/RePEc:eti:dpaper:21040
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