Keywords: Workweek, hours adjustment
Abstract: I use the term workweek flexibility to describe the ease of changing output by altering the
number of hours per worker. Despite the fact that workweek flexibility is potentially important
for understanding the cyclical behavior of marginal cost and prices, as well as cyclical
movements in hours and output, it has received little attention. Using insights from a simple
model of employment and the workweek, I use mean workweek levels to identify the effect of
workweek flexibility and then show that it is an important determinant of firms' marginal cost
schedules and the variance of industry workweeks and hours. I use the same identification
scheme with panel data to see if an increase in workweek flexibility has been behind the rise in
hours per worker over the past 30 years and find that it has not.
Full paper (437 KB PDF)
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Last update: October 13, 2004