Implementing the 35 hour workweek by means of overtime taxation

Victoria Osuna, Victor Rios-Rull

Research output: Contribution to journalReview articlepeer-review

15 Scopus citations

Abstract

This paper studies the implications of taxing overtime work to reduce the workweek. We study the roles played by team work, commuting costs and idiosyncratic output risk in determining the choice of the workweek. To obtain reliable estimates, we calibrate the model to the substitutability between overtime and employment using business cycle information. We find that a tax-rate of 12% of overtime wages reduces the workweek from 40 to 35 hours. This tax change increases employment by 7% and reduces output and productivity by 10.2% and 4.2%, respectively. Moreover, the welfare costs of this policy seem to be very large.

Original languageEnglish (US)
Pages (from-to)179-206
Number of pages28
JournalReview of Economic Dynamics
Volume6
Issue number1
DOIs
StatePublished - Jan 2003

Keywords

  • 35 hour workweek
  • Labor policy
  • Overtime
  • Workweek

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