Has Work-Sharing Worked in Germany?

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Starting in 1985, (West) German unions began to reduce standard hours on an industry by industry basis, in an attempt to lower unemployment. Whether work-sharing works - whether employment rises when hours per worker are reduced - is theoretically ambiguous. I test this using both individual data from the German Socio-Economic Panel and industry data to exploit the cross-section and time-series hours variation. For the 1984-1989 period I find that, in response to a one hour fall in standard hours, employment rose by 0.3-0.7%, but that total hours worked fell 2-3%, implying possible output losses. As a group workers were better off, however, as the wage bill rose. The employment growth implied by the mean standard hours decline, at most 1.1%, was not enough to bring German employment growth close to the U.S. rate. Results for the 1990-94 period were more pessimistic.

Published: Quarterly Journal of Economics, Vol. 114, no. 1 (February 1999): 117-148.

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