DP1553 | Has Work Sharing Worked in Germany?

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31/01/1997

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Abstract

Starting in 1985, (West) German unions began to reduce standard hours on an industry-by-industry basis in an attempt to lower unemployment. Whether ?work-sharing? works ? whether employment rises when hours per worker are reduced ? is theoretically ambiguous. I test this using both individual data from the German Socio-Economic Panel and industry data to exploit the cross-section and time-series hours variation. For the 1984?9 period, I find that, in response to a one-hour fall in standard hours, employment rose by 0.3?0.7%, but that total hours worked fell by 2?3%, implying possible output losses. As a group, however, workers were better off as the wage bill rose. The employment growth implied by the mean standard hours decline, at most 1.1%, was not enough to bring German employment growth close to the US rate. Results for the 1990?94 period were more pessimistic.