Working Paper: CEPR ID: DP6314
Authors: Claudio Michelacci; Josep Pijoan-Mas
Abstract: We consider a labor market search model where, by working longer hours, individuals acquire greater skills and thereby obtain better jobs. We show that job inequality, which leads to within-skill wage differences, gives incentives to work longer hours. By contrast, a higher probability of losing jobs, a longer duration of unemployment, and in general a less tight labor market discourage working time. We show that the different evolution of labor market conditions in the US and in Continental Europe over the last three decades can quantitatively explain the diverging evolution of the number of hours worked per employee across the two sides of the Atlantic. It can also explain why the fraction of prime age male workers working very long hours has increased substantially in the US, after reverting a trend of secular decline.
Keywords: working hours; wage inequality; unemployment; search; human capital
JEL Codes: E24; G31; J31
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| job inequality (J70) | incentives for longer hours worked (J33) |
| higher probability of job loss (J63) | reduced incentive to work longer hours (J22) |
| longer unemployment durations (J65) | reduced incentive to work longer hours (J22) |
| diverging evolution of labor market conditions in the US and Europe (J49) | differences in hours worked per employee (J22) |
| intertemporal return to working time in the US (J22) | differences in working hours between the US and Germany (J22) |
| longer working hours (J29) | significant intertemporal returns (D15) |