Working Paper: CEPR ID: DP17311
Authors: Lin Shao; Faisal Sohail; Emircan Yurdagul
Abstract: This paper studies the degree of complementarity in working hours among coworkers in production. Using matched employer-employee data, we first present facts on the within-establishment relationship between wages and hours worked that are consistentwith the presence of complementarities in working hours. Next, we estimate the elasticity of substitution in working hours and find it to be 0.69 in the aggregate and between 0.52 and 1.04 across industries. We validate our elasticity estimates by showing that industries with higher elasticities exhibit greater flexibility in hours. Our results suggest that working hours are gross complements in production rather than perfect substitutes, as is typically assumed. An accounting exercise using our model estimations suggests that hours-wage penalties, due to complementarities in hours, canexplain 5 to 30 percent of the gender wage gap over the life-cycle.
Keywords: labor supply; complementarities; wages; production; flexibility; coordination
JEL Codes: E23; J22; J23; J31
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| working hours (J22) | wages (J31) |
| average hours of coworkers (J22) | individual working hours (J22) |
| deviations from median or wage-maximizing hours (J38) | wage penalties (J31) |
| working hours (J22) | elasticity of substitution (D11) |
| working hours (J22) | hump-shaped profile of wages (J31) |