Finance and Economics Discussion Series (FEDS)
October 2004
Workweek Flexibility and Hours Variation
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.
Keywords: Workweek, hours adjustment
PDF: Full Paper
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