Firm-Level Effects of Reductions in Working Hours
Marta C.Lopes and
No 2022-05, FBK-IRVAPP Working Papers from Research Institute for the Evaluation of Public Policies (IRVAPP), Bruno Kessler Foundation
How do legislative reductions in hours impact firms? In this paper, we use matched employer-employee data to evaluate a policy reform in Portugal that unexpectedly reduced the usual weekly working hours from 44 to 40 hours. Using a difference-in-differences approach that exploits initial heterogeneity across collective agreements covering workers, we show that the reform led to a significant drop in working hours in treated firms, while salaries did not adjust, resulting in higher wages per hour. We observe only a small and insignificant negative effect on employment, as treated firms are able to maintain or even increase sales despite the fall in labor input (total hours worked within a firm). We show that this partly reflects higher prices rather than higher (or constant) volumes, whereby firms are able to shift the higher labor costs onto consumers.
Keywords: working time; hours; wages; labor demand; labor cost (search for similar items in EconPapers)
JEL-codes: J22 J23 J31 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-eur and nep-lma
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Persistent link: https://EconPapers.repec.org/RePEc:fbk:wpaper:2022-05
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