Friday May Never be the Same Again: Some Results on Work Sharing from Union–Firm Bargaining Models

Abstract

This paper analyses work–sharing in the union–firm bargaining context. In keeping with mechanisms observed in actual negotiations, we assume that the firm sets employment and we consider bargaining regimes with and without overtime. In models without overtime, work–sharing is consistent with union–firm bargaining provided that income–sharing occurs when the wage rises. In models with overtime, a Pareto–improving cut in the workweek requires wage concession, which is necessary, but not sufficient, for work–sharing. Our models are consistent with a number of well–established stylised facts. In particular, we explain why estimates of the actual hours–standard hours elasticity are always close to unity.