Work Schedules, Wages, and Employment in a General Equilibrium Model with Team Production

Abstract

This paper provides a general equilibrium framework in which the number of working hours and the employment levels of heterogeneous workers is endogenously determined. This is done in an environment where production requires coordinating the work schedules of different worker types, a characteristic I refer to as team production. In particular, I assume that all workers on a production team must work the same hours. Output is produced by a large number of teams, where different teams may operate different numbers of hours. The model economy has two types of people, who differ in their preferences over leisure and in the labor services they provide. Firms offer tied wage-hours packages to workers, who choose among these packages. An interesting aspect of this economy is that wages are not linear in the number of working hours, although prices are linear over the traded commodities. I show that an employment tax on high-wage workers has substantially different effects on the employment and wages of low-wage and high-wage workers when team production is explicitly modeled compared to a case when it is not.