Working-week flexibility: Implications for employment and productivity

• Published in: Economics. The open-access, open-assessment e-journal Vol. 8; no. 2014-7; pp. 1 - 29
• Main Author: Osune, Victoria
• Format: Journal Article
• Language: English
• Published: Kiel Kiel Institute for the World Economy (IfW) 01.12.2014; Sciendo; De Gruyter
• Subjects: E24; E60; employment; FDI; J21; productivity; wages; Workweek
• ISSN: 1864-6042; 1864-6042
• DOI: 10.5018/economics-ejournal.ja.2014-7

This paper evaluates the effects for the Spanish case of allowing greater flexibility regarding the weekly hours worked on the working week, employment and productivity. A baseline model economy is calibrated to reproduce the cross-sectional distribution of workweeks across plants, as well as certain features of the Spanish economy. The author compares the steady-state status quo, where a forty-hour workweek is imposed and no flexibility is allowed, and the steady-state of economies with a higher degree of flexibility in weekly hours. The 2012 reform is found to preserve employment and generate a 1.72% increase in productivity. In the work-sharing scenario, the increase in employment (1.86%) comes at the expense of a lower increase in productivity (1.31%). Finally, the full flexibility scenario preserves employment and generates a substantial increase in productivity (2.6%).