Are flexible working hours helpful in stabilizing unemployment?

Marcin Kolasa, Michał Rubaszek and Małgorzata Walerych

No 319, NBP Working Papers from Narodowy Bank Polski

Abstract: In this paper we challenge the conventional view that increasing working time flexibility limits the amplitude of unemployment fluctuations. We start by showing that hours per worker in European countries are much less procyclical than in the US, and in some economies even co-move negatively with output. This is confirmed by the results from a structural VAR model for the euro area, in which working hours increase after a contractionary monetary shock, exacerbating the upward pressure on unemployment. To understand these counterintuitive results, we develop a structural search and matching macroeconomic model with endogenous job separation. We show that this feature is key to generate countercyclical adjustments in working hours. When we augment the model with frictions in working hours adjustment and estimate it using euro area time series, we find that increasing flexibility of working time amplifies cyclical movements in unemployment.

Keywords: labor market; search and matching; job separation; working time; business cycle fluctuations (search for similar items in EconPapers)
JEL-codes: E24 E32 J22 J64 (search for similar items in EconPapers)
Pages: 49
Date: 2019
New Economics Papers: this item is included in nep-dge and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Do flexible working hours amplify or stabilize unemployment fluctuations? (2021)
Working Paper: Are flexible working hours helpful in stabilizing unemployment? (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:nbp:nbpmis:319

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