AbstractHigh unemployment rates still make the headlines of the newspapers many years after the 2008 and 2012 recessions. A low employment rate persists despite a recovery in GDP. Economists name that phenomenon “jobless recoveries”.
We present new evidences that while it takes more time to find a new job when unemployed, workers currently on the job are working longer hours, in particular after financial crises. We then successively take the point of view of employers and employees on the optimal number of hours of work.
We show that employers face large fixed labour costs, independent of their employees’ working time. They thus have a strong incentive to increase working time to recover their cost, despite the fact that longer hours make employees less and less productive.
We also show that when a negative shock affects the economy, employees have a strong incentive to increase their effort to keep their job. We study how this increase in effort, that can take the form of overtime, affects the employment rate.
|Date of Award||14 Jun 2019|
|Supervisor||ALAIN DE CROMBRUGGHE DE PICQUENDAELE (Supervisor), Jean-Marie BALAND (President), Mathias HUNGERBUHLER (Jury), Vincent Vandenberghe (Jury), Grégory De Walque (Jury) & Céline Poilly (Jury)|