Decline In Hours Research Articles

WHOSE PREFERENCES ARE REVEALED IN HOURS OF WORK?

ABSTRACTIt has become orthodox in economics research to interpret the association between hourly earnings and working hours as the expression of the preferences of workers. This convention originated in H. Gregg Lewis' explanation for the decline in hours of work since the nineteenth century. His explanation rested on an explicit resolution of the identification problem inherent in any quantity (hours)–price (wage) relation. For over 40 years, researchers have neglected this identification problem with the result that the findings in the purported “labor supply” literature are of questionable value. (JEL J22, J23, C13)

Whose Preferences are Revealed in Hours of Work?

It has become orthodox in economics research to interpret the association between hourly earnings and working hours as the expression of the preferences of workers. This convention originated in H. Gregg Lewis' explanation for the decline in hours of work since the nineteenth century. His explanation rested on an explicit resolution of the identification problem inherent in any quantity (hours) - price (wage) relation. For over forty years, researchers have neglected this identification problem with the result that the findings in the purported labor supply literature are of questionable value.

News, disaster risk, and time-varying uncertainty

Standard real business cycle models are often unable to replicate three empirical facts: positive output in response to good news, stochastic volatility of macro variables, and asymmetric business cycles. This paper proposes a unified basis for understanding these facts in a tractable dynamic stochastic general equilibrium (DSGE) model, in which the key is the interaction of information flows and disaster risk. Information flows fluctuate between two regimes with different precision levels for signals regarding future economic fundamentals. A shift in forecast precision changes the probability of entering an economic disaster. High disaster risk leads to low expected capital returns and a decline in hours, investment, and output. Changing information structures results in different volatility and skewness over the business cycle. Simple theory makes the two expectation effects through information flows and disaster risk transparent. Quantitatively, the model suggests that the interaction of the two expectation effects plays a significant role in accounting for the higher-order moments of the business cycle.

Working Less and Bargain Hunting More: Macro Implications of Sales During Japan's Lost Decades

Standard New Keynesian models have often neglected temporary sales. In this paper, we ask whether this treatment is appropriate. In the empirical part of the paper, we provide evidence using Japanese scanner data covering the last two decades that the frequency of sales was closely related with macroeconomic developments. Specifically, we find that the frequency of sales and hours worked move in opposite directions in response to technology shocks, producing a negative correlation between the two. We then construct a dynamic stochastic general equilibrium model that takes households’ decisions regarding their allocation of time for work, leisure, and bargain hunting into account. Using this model, we show that the rise in the frequency of sales, which is observed in the data, can be accounted for by the decline in hours worked during Japan’s lost decades. We also find that the real effect of monetary policy shocks weakens by around 40% due to the presence of temporary sales, but monetary policy still matters.

What (really) accounts for the fall in hours after a technology shock?

The paper asks how state of the art DSGE models that account for the conditional response of hours following a positive neutral technology shock compare in a marginal likelihood race. To that end we construct and estimate several competing small-scale DSGE models that extend the standard real business cycle model. In particular, we identify from the literature six different hypotheses that generate the empirically observed decline in hours worked after a positive technology shock. These models alternatively exhibit (i) sticky prices; (ii) firm entry and exit with time to build; (iii) habit in consumption and costly adjustment of investment; (iv) persistence in the permanent technology shocks; (v) labor market friction with procyclical hiring costs; and (vi) Leontief production function with labor-saving technology shocks. In terms of model posterior probabilities, impulse responses, and autocorrelations, the model favored is the one that exhibits habit formation in consumption and investment adjustment costs. A robustness test shows that the sticky price model becomes as competitive as the habit formation and costly adjustment of investment model when sticky wages are included.

Do SVAR Models Justify Discarding the Technology-Shock-Driven Real Business Cycle Hypothesis?

This study investigates the validity of technology shocks as a driving force of US business cycle fluctuations. Using three well-known structural vector autoregression ( SVAR) models, we analyse how structural shocks are associated with the variations of output and hours worked at business cycle frequencies. Empirical results reveal that technology shocks remain an important source of cyclical movements in output. Furthermore, a positive technology shock does not lead to a decline in hours worked, in contrast to previous studies. Our SVAR-based evidence does not support discarding a technology-shock-driven business cycle theory.

Working Less and Bargain Hunting More: Macro Implications of Sales during Japan's Lost Decades

Standard New Keynesian models have often neglected temporary sales. In this paper, we ask whether this treatment is appropriate. In the empirical part of the pa- per, we provide evidence using Japanese scanner data covering the last two decades that the frequency of sales was closely related with macroeconomic developments. Specifically, we find that the frequency of sales and hours worked move in opposite directions in response to technology shocks, producing a negative correlation be- tween the two. We then construct a dynamic stochastic general equilibrium model that takes households' decisions regarding their allocation of time for work, leisure, and bargain hunting into account. Using this model, we show that the rise in the frequency of sales, which is observed in the data, can be accounted for by the decline in hours worked during Japan's lost decades. We also find that the real effect of monetary policy shocks weakens by around 40% due to the presence of temporary sales, but monetary policy still matters.

Dynamic effects of labor supply: A mechanism explaining cross-sectional differences in hours

This paper first establishes the empirical fact that over the last quarter of the 20th century, the average weekly hours worked increased for workers in the highest wage quintile while it decreased for the ones at the lowest. In 1976, a worker in the lowest quintile worked 2.8 hours more per week than a high wage worker (worker in the highest quintile), but by 2006, the low wage worker worked 1 hour less. During this period, there was also a wide increase in wage inequality. The typical mechanism in which hours are only determined by contemporaneous wages cannot simultaneously explain the pattern found in both variables for every quintile.This paper attempts to reconcile these cross-sectional trends in both hours and wages for the US during this time period. As a first step, we show that compositional changes (in education, occupation and age) within quintiles can only explain a fraction of the observed pattern. Next, we propose a mechanism in which individuals' current decisions of how much to work take into account two components: the contemporaneous benefit of the wage received, and also how current hours worked affects the probability of moving across the wage distribution in later periods. The latter dynamic component is estimated from our dataset. We find that changes over time in how hours affect these probabilities provided incentives that differ across the quintiles, and are consistent with the labor supply decisions observed in the data. We incorporate these two components into an equilibrium model of heterogeneous agents with uninsurable income risk. We are able to replicate the decline in hours for the bottom of the distribution as well as the increase at the top. The ratio of hours worked between the two groups delivered by the model also fits the trend found in the data.

IMPERFECT TRANSMISSION OF TECHNOLOGY SHOCKS AND THE BUSINESS CYCLE CONSEQUENCES

We investigate the business cycle effects of imperfect transmission of technology shocks within a basic real business cycle (RBC) model along two dimensions. First, we assume that agents cannot distinguish a temporary increase in productivity growth from a sustained increase in the underlying growth rate of productivity and instead must conduct signal extraction exercises and update beliefs about the source of aggregated shocks. Second, we propose a technology adjustment cost resulting in the slow diffusion of technological innovations into the production process. Both of these impediments to the transmission of technology result in a large initial wealth effect, increasing investment and hours less, relative to the usual RBC model without these frictions. Furthermore, each of these features is capable of producing a decline in hours on impact of the technology shock matching the negative response in hours found in the data by such works as Gali [American Economic Review89(1), 249–271 (1999)].

The effect of hours of work on social interaction

Increases in hours of work per capita over past 30 years have created an intuitively plausible notion that there now is less time for social interaction. The purpose of this paper is to empirically investigate the effect of hours of work on social interaction. The empirical work is complicated by the argument that unobserved factors could increase both hours of work and social interaction. The empirical work in this paper employs an exogenous decline in hours of work in France due to a new employment law to bypass this endogeneity problem. The data employed are derived from the 1999–2003 Continuous Survey of Household Living Conditions which is a random sample of French households. Gender specific results from a difference-in-difference model show that the employment laws reduced hours of work but there is no evidence that the extra hours went to increased social interactions. Contrary to the intuitive argument, the paper concludes that in the range of approximately 94 extra hours of leisure per year, hours of work have no effect on social interaction.

Adverse Changes In Faculty Behavior Resulting From Use Of Student Evaluations Of Teaching: A Case Study

Based on a detailed literature review and longitudinal analysis, this paper explores the possible underlying causes of the decline in the number of hours per week graduating business seniors indicated they studied during their senior year. The study was conducted at an AACSB accredited college of business at a regional university. The study indicates that the decline in hours studied was likely an unintended result of using a process designed to demonstrate continuous improvement in teaching. The process utilized the Educational Testing Service’s SIR II student evaluation instrument as the only measure of teaching quality/effectiveness. The study concludes that the process may have pressured some instructors to sacrifice teaching rigor in an attempt to obtain more favorable student evaluations, thereby precipitating the decline in hours studied.

Changes in Resident Work and Sleep Hours 1999 to 2009: Results From a Survey of 4 Specialties

Resident work hours have been a recurring source of concern and controversy for many years. From the Spartan origins of the Halsted generic model of the surgical service at Johns Hopkins in 1897 to the present, there have been major tensions between the educational needs of learners and the workload demands of patient care, resulting, at times, in classic labor-management confrontations about work hours and conditions.

Technology Shock and Employment: Do We Really Need DSGE Models with a Fall in Hours?

The recent empirical literature that uses Structural Vector Autoregressions (SVAR) has shown that productivity shocks identified using long--run restrictions lead to a persistent and significant decline in hours worked. This evidence calls into question standard RBC models in which a positive technology shock leads to a rise in hours. In this paper, we estimate and test a standard RBC model using Indirect Inference on impulse responses of hours worked after technology and non-technology shocks. We find that this model is not rejected by the data and is able to produce impulse responses in SVAR from simulated data similar to impulse responses in SVAR from actual data. Moreover, technology shocks represent the main contribution to the variance of the business cycle component of output under the estimated DSGE model. Our results suggest that we do not necessarily need DSGE models with a fall in hours to reproduce the results deriving from SVAR models.

The Declining Work Week

Over the past five years average hours per worker, as recorded in the Household Labour Force Survey, have trended downwards. According to the frequently used measure of average hours per worker, total hours divided by total employment, people are now working 5% fewer hours than they were in 2004. This has contributed to weak growth in labour input over recent years. This paper uses data from the Household Labour Force Survey to examine what is behind the recent fall in hours worked per worker. It attempts to answer whether the fall has been due to compositional changes, such as population ageing and increased participation of women, or whether people are just working fewer hours than they used to. This paper estimates that up to 40% of the fall in average hours over the past five years is due to increased annual leave entitlements, while compositional changes are estimated to account for around 11%. The remainder of the fall in average hours appears to be due to a decline in hours worked within jobs. Fewer people working long hours and firms hoarding labour over the recent downturn are identified as two of the key explanations for this.

Physician labour supply in Canada: a cohort analysis

This paper employs a cohort analysis to examine the relative importance of different factors in explaining changes in the number of hours spent in direct patient care by Canadian general/family practitioners (GPs) over the period 1982-2003. Cohorts are defined by year of graduation from medical school. The results for male GPs indicate that there is little age effect on hours of direct patient care, especially among physicians aged 35-55, there is no strong cohort effect on hours of direct patient care, but there is a secular decline in hours of direct patient care over the period. The results for female GPs indicate that female physicians on average work fewer hours than male physicians, there is a clear age effect on hours of direct patient care, there is no strong cohort effect, and there has been little secular change in average hours of direct patient care. The changing behaviour of male GPs accounted for a greater proportion of the overall decline in hours of direct patient care from the 1980s through the mid-1990 s than did the growing proportion of female GPs in the physician stock.

Trends in hours: The U.S. from 1900 to 1950

During the first half of the 20th century the length of the workweek in the U.S. declined, and its distribution across wage deciles narrowed. The hypothesis is twofold. First, technological progress, through the rise in wages and the decreasing cost of recreation, made it possible for the average U.S. worker to afford more time off from work. Second, changes in the wage distribution explain the changes in the distribution of hours. A general equilibrium model is built to explore whether such mechanisms can quantitatively account for the observations. The model is calibrated to the U.S. economy in 1900. It predicts 82% of the observed decline in hours, and most of the contraction in their dispersion. The decline in the price of leisure goods accounts for 7% of the total decline in hours.

Leben, um zu arbeiten, oder arbeiten, um zu leben?

In a recent paper, Gerhard Schildt has argued that we suffer from mass unemployment today because technical progress has caused structural change that has led to a long-term decrease of working opportunities. By showing the secular decline of hours worked per year, Schildt concludes that this trend is irreversible and causes increasing unemployment. We argue that this conclusion is based on the confusion of a statistical observation with a causal explanation. Schildt's thesis is not compatible with the empirical fact that every advanced country has experienced the same decline of hours worked whereas many do not suffer from unemployment today. Moreover, Schildt focuses only on the labour demand of firms without taking into account the labour supply of households. It is not that technological progress has rendered human work obsolete, but rather the other way round: it allows us a life that is not fully devoted to work in order to survive and even comes along with a much higher standard of living.

A Note on "The Longitudinal Structure of Earnings Losses among Work-Limited Disabled Workers"

Charles (2003) examines the dynamic effects of disability, finding a small decline in earnings and hours following disability onset, even for those who have positive disability reports for each of the next ten years. These outcomes also rebound quickly after the onset of disability. In recent work, Meyer and Mok (2006), find a much larger loss in earnings and a greater decline in hours. Here we find large and persistent declines in earnings and hours, generally several times those reported in Charles (2003). The current findings were arrived at by two research teams working independently without sharing any computer code.

Avoiding pitfalls in using structural VARs to estimate economic models

Structural Vector Autoregressions with a differenced specification of hours (DSVAR) suggest that productivity shocks identified using long-run restrictions lead to a persistent and significant decline in hours worked. Economists have interpreted this evidence as showing that standard business cycle models in which a positive technology shock leads to a rise in hours are inconsistent with the data. In this paper we argue that such a conclusion is unwarranted because model's data and actual data are not treated symmetrically. To illustrate this problem, we estimate and test a flexible-price DSGE model with non-stationary hours using Indirect Inference on impulse responses of hours and output after technology and non-technology shocks. We find that, once augmented with a moderate amount of real frictions, the model can mimic well impulse responses obtained from a DSVAR on actual data. Using this model as a data generating process, we show that our estimation method is less subject to bias than a method that would directly compare theoretical responses with responses from the DSVAR.

A Model of the Trends in Hours

During the first half of the 20th century the workweek in the United States declined, and the distribution of hours across wage deciles narrowed. The hypothesis proposed is twofold. First, technological progress, through the rise in real wages and the decreasing cost of recreation, made it possible for the average US worker to afford more time off from work. Second, changes in the distribution of wages and the cost of education explain the shifts in the distribution of hours. A model is built to explore whether such mechanisms can, quantitatively, account for the observations. The model is consistent with changes in the wage distribution, the rise in education, the share of expenditures devoted to recreation and the amount of GDP growth in the US during the first half of the century. Counterfactual experiments show that the rise in wages is the main contributor to the decline in hours.