Working Hours Reduction and Endogenous Growth

Chun-chieh Huang, Ching-chong Lai and Juin-jen Chang
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Chun-chieh Huang: Graduate Institute of Economics, National Cheng Chi University, Taiwan

No 04-A006, IEAS Working Paper : academic research from Institute of Economics, Academia Sinica, Taipei, Taiwan

Abstract: This paper formulates an endogenous growth model and uses it to inquire into the long-run impact of work-sharing arrangements on economic growth. We show that the styles of wage contract, namely salary-style and hourly-style contracts, are a key factor in determining the long-run growth effects of working time reduction. If the labor market is overwhelmingly salaried arrangement, then the extent of wage flexibility is relatively low; as a consequence, a policy of reducing working hours will deteriorate economic growth. On the contrary, if hourly pay predominates, then the wage system tends to increase the degree of wage flexibility. Thus, a cut in working time may favor the economy’s growth rate.

Keywords: Working hours reduction; Endogenous growth (search for similar items in EconPapers)
Pages: 16 pages
Date: 2004-02
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