Abstract
This paper analyzes the economic consequences of a legal overtime regulation. The results of the study indicate that restricting the use of overtime leads to both, a short term increase of personnel capacity, and a reduction of expected profits. However, the overall effect on the demand for labor is ambiguous, because at the same time the expected demand for overtime is decreasing. Especially for industries with labor-intensive production technologies and moderate overtime premia, the overall effect is likely to be negative. Furthermore, since the profit reduction also provides incentives to reduce the relative amount of labor used in production, it is not clear if a positive short term effect on the demand for labor will also be positive in the long run.
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