Does Shorter Working Time Improve Employment and Economic Growth?

This dissertation intends to re-examine the efficiency wage hypothesis, and offer an explanation of why working time reduction has an ambiguous impact on employment. In addition, this dissertation also examines the effect of shorter working hours on the economic growth rate that has not been discussed.In Chapter 2, we set up a shirking model of efficiency wages with endogenous working time and uses it to address how the endogenous working time twists the leakage between the work effort level and wages. This result thus provides a conceivable reason to illustrate the empirical finding of the possible perverse linkage between worker’s effort and wages.Chapter 3 illustrates a shirking-type efficiency wage model to explain why shorter working hours causes an ambiguous effect on employment as the empirical results. We find that shorter working hours has an uncertain impact on the work effort, and it is the key factor determining the whole outcomes. Besides, it is also found that, given the zero profits constraint, the long-run employment effect of reducing working hours will intensify short-run employment effect.Chapter 4 formulates an endogenous growth model and uses it to inquire into the long-run impacts of work sharing arrangements on economic growth. We show that the styles of wage contracts, namely salary-style and hourly-style contracts, will be a key factor in determining the long-run growth effects of working time reduction. If labor market is overwhelmed by salary arrangement with lower wage flexibility, a policy of reducing working hours will deteriorate economic growth rate. On the contrary, if countries face hourly-style arrangements which tends to increase the degree of wage flexibility, a cut in working time may favor the economy’s balanced growth rate.Chapter 5 examines the effects of reducing in working time on economic growth and unemployment rate with a simple search-matching model where wage is endogenously determined by bargaining between firms and unemployed workers. The growth effects of shorter working hours are similar to that in Chapter 4, and the styles of wage contracts, namely salary-style and hourly-style contracts, plays a crucial role determining the whole outcome. However, a cut in working time has an uncertain effect on the unemployment rate either in salary or hourly wage arrangement