Does Labour Work? A Macroeconomic Perspective on Work Time Reduction

Abstract

We conduct an empirical study on work time reduction and its accompanying macroeconomic outcomes across countries. Specifically, we frame the analysis in the context of neoclassical and post-Keynesian economic theory, and their differing predictions on work time reduction, real GDP growth, unemployment and functional distribution. We employ a structural vector autoregression (SVAR) analysis on country-level quarterly panel data. Modelling structural relationships between our macroeconomic variables, we find that a negative shock to work time induces growth, reduces unemployment and leaves functional inequality unaffected during the years to follow. Thus, we corroborate the positive effects of work time reduction described in the literature. For data and code, see digital appendix.