The Effect of a Reduction in Working Hours on Employment: Empirical Evidence for West-Germany

Abstract

This paper deals with the effect of a reduction of weekly working time on employment. Often working time reduction is proposed to stimulate employment. We investigate this hypothesis for West Gennan industrial branches using annual data from 1960 to 1995. The analysis is carried out by the means of panel econometric methods. The results suggest that a reduction of a weekly working time has no impact on the level of employment. Moreover, we identify arise in the firm's demand for overtime hours as one reason for this outcome. (C23, J23)