Labour Economics 11 (2004) 293 – 313

www.elsevier.com/locate/econbase

The myth of worksharing

Arie Kapteyn a,*, Adriaan Kalwij b, Asghar Zaidi c
a
RAND, 1700 Main Street, Santa Monica, CA 90407, USA
b
Tilburg University, Netherlands
c
London School of Economics, UK
Received in revised form 5 April 2003; accepted 5 August 2003

Abstract

Worksharing is considered by many as a promising public policy to reduce unemployment. This

paper reviews the most pertinent theoretical and recent empirical contributions to the literature on
worksharing. Next, we provide new empirical evidence on this issue by a longitudinal cross-country
analysis of the long-run effects of a reduction in working hours on employment and wages,
exploiting aggregate data for 16 OECD countries. The conclusions of the theoretical literature survey
are indecisive: the efficacy of worksharing as an employment enhancing policy tool depends heavily
on the setting in which the analysis takes place. In line with recent empirical studies, our results do
not support the proposition that worksharing promotes employment. The results show a positive
direct effect on employment of a reduction in working hours. However, taking into account indirect
effects, in particular the upward effects on wages, we find that the long-run effect becomes small and
insignificant.
D 2003 Elsevier B.V. All rights reserved.

JEL classification: C33; E24; J2; J3

Keywords: Employment; Hours of work; Panel data

1. Introduction

In public discussions, the idea of worksharing often emerges as a potential instrument

for reducing unemployment, or equivalently to increase the number of people in paid
employment. The idea is usually based on the simple notion that in a given period a

* Corresponding author. Tel.: +1-310-393-0411x7973; fax: +1-310-451-7084.

E-mail address: kapteyn@rand.org (A. Kapteyn).

0927-5371/$ - see front matter D 2003 Elsevier B.V. All rights reserved.
doi:10.1016/j.labeco.2003.08.001
294 A. Kapteyn et al. / Labour Economics 11 (2004) 293–313

fixed amount of labour input required to produce a fixed volume of goods and services
can be shared between persons who are already employed and those who are
unemployed. It is argued that in this way a trade-off can be made between positively
valued leisure of the employed and unwanted leisure of the unemployed. The idea
appears to be particularly popular in Europe, but it also has a venerable history in the
US.1
However, economists as well as employers are mostly sceptical about the success of
this policy prescription. The fallacy2 of this seemingly simple idea is made clear in the
literature especially by its impact on wages, wage costs, and output. In this study, we seek
to provide a review of the most pertinent theoretical and empirical contributions to this
literature, and in addition provide new empirical evidence on the efficacy of worksharing
in increasing employment based on a comparison of economies over time and across
countries.
The rest of this paper is organised in three sections. Section 2 reviews the most relevant
literature and discusses the most important factors determining the employment effects of a
reduction in working hours. Section 3 presents new empirical evidence regarding the
consequences for employment of a reduction in working hours based on a panel of 16
OECD-countries. Final conclusions are drawn in Section 4.

2. Literature review

The form of worksharing examined in this study is the reduction of the standard or
contractual hours worked per time period, often referred to as ‘‘shorter hours’’. Other
forms of worksharing such as early retirement of the currently employed (e.g. Layard et
al., 1991) or job sharing (e.g. Dreze, 1985; Roche et al., 1996) are not examined here.
However, the insights in the employment effects of shorter hours will bring out many
important issues that are also relevant for other forms of worksharing. This section reviews
the most pertinent theoretical and recent empirical contributions to the literature on
worksharing. In a previous version of this study (Kapteyn et al., 2000), we provide a more
extensive literature overview and a review of some selected public policy experiments in
European countries with respect to worksharing.

1
For example, during the height of the recession in 1933, Alabama’s senator Hugo Black introduced a bill
prohibiting ‘‘interstate commerce in goods produced in ‘any mine, quarry, mill, cannery, workshop, factory, or
manufacturing establishment’ that worked its employees more than thirty hours a week’’ (Davis, 1979, p. 97).
Likewise, during the industrial revolution at the beginning of the 19th century the Luddites destroying the looms
that put them out of work were acting upon the same assumption that the total lump of labour was fixed and hence
any labour-saving technical progress would reduce employment.
2
The governments of France and Italy have recently introduced a cut in the legal working week to 35 h as a
way to reduce unemployment. This seems to make excellent sense to a lot of people, mainly from a simple
intuition that so many workers complain about being overworked, while one in nine Europeans is idle? However,
it is depressing that supposedly responsible governments continue to pretend to be unaware of the old ‘lump of
labour’ fallacy: the illusion that the output of an economy and hence the total amount of work available are fixed
(‘‘One lump or two?’’, The Economist, October 25th 1997).
 A. Kapteyn et al. / Labour Economics 11 (2004) 293–313 295

2.1. Worksharing and actual working hours3

Calmfors and Hoel (1988) examine in a seminal article the response of a cost-
minimizing firm to a reduction in standard hours, holding output fixed.4 They show that
a firm’s response in the demand for workers and hours per worker differs corresponding to
the initial situation, i.e. before the reduction of standard hours. If in the initial situation the
firm required its workers to work overtime the reduction in standard hours is shown to
increase actual working hours, and hence total employment falls. The reason for this
seemingly counterintuitive result is the following: the reduction in standard hours
increases the price of a worker since the firm has to pay more overtime hours, but has
left the price of an additional hour unaffected. In response to this change in the relative
price, the firm will use more of the input of which the price has not changed (hours) and
will use less of the input of which the price has gone up (employees). If in the initial
situation all workers worked standard hours then the employment effect depends on the
new optimal situation. If the optimal situation remains that all workers work standard
hours, then clearly the number of hours will fall and employment will go up. It is possible,
however, that it will become advantageous to the firm to require its workers to work
overtime, in which case it cannot be said a priori what the employment effects of a
reduction in standard hours will be. In the case where initially actual hours were less than
standard hours, conceivably the reduction in standard hours may move the optimal
situation to a situation where all workers work standard hours, or even to a situation
where it is optimal to work overtime. Additionally in this case, it is not possible to state a
priori what the employment effects will be.
The empirical evidence on the reaction of actual hours to a change of standard hours
indicates that actual hours follow standard hours, though possibly not completely. Hunt’s
(1999) empirical work—using data from the German Socio-Economic Panel—suggests
that at least for ‘‘Arbeiter’’ (hourly workers) in manufacturing a 1-h fall in standard hours
led to a fall in actual hours of between 0.85 and 1.0. De Regt (1988) finds that a 1%
reduction in standard hours reduces actual hours by 0.89% for the Netherlands over the
period 1954– 1982, whereas according to Hart and Sharot (1978) a 1% reduction in the
standard hours for the UK over the period 1961– 1972 resulted in a 0.92% reduction in
actual working hours. Kalwij and Gregory (2000), using British data over the period
1975 –1999, find that a 1-h fall in standard hours leads to a 0.1-h increase in overtime
hours. Jacobson and Ohlsson (2000) find that actual working hours and legislated working
hours move together in the long run and conclude that policy makers can influence actual
hours by using legislated working hours as an instrument. Thus, the conclusion drawn
from the empirical literature is that actual working hours appear to be moving in the same

3
Contensou and Vranceanu (2000) provide an overview of a wide range of theoretical models of the
determination of working hours, with and without union bargaining.
4
To be more precise, they examine a situation in which a firm produces a fixed level of output according to a
production function in which labour input is equal to the number of persons employed times the number of hours
worked in efficiency units. Efficiency per hour may initially increase with hours but will eventually fall if the
number of hours increases. Furthermore, capital input is fixed. The labour cost of one worker consists of a fixed
cost and the salary as determined by the contractual hours of work plus any overtime hours that are paid with an
overtime premium.
296 A. Kapteyn et al. / Labour Economics 11 (2004) 293–313

direction as standard hours. This implies a positive employment effect of worksharing if

there are no offsetting effects through changes in other determinants of employment such
as total output.
Calmfors and Hoel (1988) examine the effect of worksharing on output by assuming
that firms aim at profit maximization. Then an increase in labour cost entailed in a standard
working time reduction leads to a ‘‘scale effect’’ which reduces total output and total
labour use. Hence, any positive employment effects may be mitigated, and even reversed,
if output is affected.

2.2. Worksharing and wages

Allowing for an interaction of hours and wages is seen to be of prime importance for
the evaluation of the employment effects of worksharing. Calmfors (1985) examines a
situation in which there is one union with monopoly power in setting wages, although the
goals of achieving higher wages are constrained by the risk of unemployment. Given the
wage set by the union, firms then decide on employment and working hours. The union is
assumed to maximize the average utility of its members, which includes employed as well
as unemployed. Given the production technology and the union’s objective function, one
can derive the reaction of employment to normal hours. It turns out that the sign of the
reaction depends on the parameters of the production function and utility function
parameters. Different authors have therefore reached different conclusions. Houpis
(1993) considers a number of different wage determination models and estimates of
crucial parameters from the literature. His evidence points towards a positive effect of a
reduction in working hours on employment. Booth and Schiantarelli (1987) use the same
model as Calmfors (1985), but make specific assumptions about the production function
(Cobb –Douglas) and the utility function of workers (Stone –Geary) and use empirical
evidence from the literature to establish reasonable parameter values. On the basis of this
calibration of their model they conclude that ‘‘the employment effect of a cut in hours is
more likely to be negative’’. They also look at several variants of the model, including
dynamic ones, and efficient bargaining models, where unions decide on both wages and
employment. Their overall conclusions remain the same: shorter hours are likely to induce
higher unemployment. A somewhat different variant is due to Booth and Ravallion (1993)
who employ a framework very similar to that of Calmfors and Hoel (1988), but they
abstract from overtime. They apply their model to aggregated data for the UK and
Australia and find that in the UK a cut in hours may have a positive effect on employment.
For Australia, the results are ambiguous. The disaggregated results for Australia show that
in 7 out of 12 industries the employment will increase as a result of a cut in working hours
(when wages and hours have been bargained efficiently).
A number of other authors have investigated the direct effect of shorter hours on wages.
Hunt (1999) uses the micro-dataset of the German Socio-Economic Panel (GSOEP) to
analyse the effect of the reduction in standard working hours that were achieved by trade
unions in (West) Germany starting from 1985. The author finds that although the reduction
in standard working hours led to a fall in actual working hours (see Section 2.1), the fall in
earnings is almost fully compensated for by a rise in the hourly wage rate. These results
are inconsistent with the hypothesis that reductions in standard working hours are
 A. Kapteyn et al. / Labour Economics 11 (2004) 293–313 297

accompanied by wage restraints, as argued by Houpis (1993). Franz and Smolny (1994)
reach slightly different conclusions. On the basis of a quarterly macro-time series model
for German manufacturing from 1970 – 1989, they find that in certain industries hourly
wages rose as a result of a reduction in standard hours but by and large workers are only
partly compensated for the shorter working week. Nymoen (1989) uses quarterly
Norwegian manufacturing data and finds a strong short-term effect of standard hours on
wages (the possibility of a full compensation in earnings for the fall in hours lies within the
95% confidence interval of the estimated parameter), but in the long run the effect
disappears. Holmlund and Pencavel (1988) find a positive effect of a reduction in hours on
wages, using Swedish data for the manufacturing and mining sector. In line with this latter
result, Jacobson and Ohlsson (2000) find a negative long-run relationship between wages
and working hours in the private sector in Sweden over the period 1970– 1990. Estimates
by Dur (1997) for the Netherlands show significant effects of a reduction in the number of
contractual hours on wages. He finds that a 1% reduction in working time will increase the
hourly wage by about 0.45%. Friesen (2002), for Canada, also reports substantially higher
wages in jurisdictions with lower standard hours. Obviously, the results of Dur (1997),
Hunt (1999) and Friesen (2002) contrast with the results presented in Houpis (1993) who
believes that (hourly) wages are not likely to rise as a result of a reduction in working
hours. In addition, Freeman (1998) discounts the possibility that wage demands from trade
unions are the principal reason for the minimal effect of worksharing policies. This is
because most trade unions recognize that a demand for full compensation of the reduction
in working hours makes worksharing costly and potentially counter-productive. He refers
to the fact that at least in some countries where the worksharing policy is pursued (for
instance Belgium and the Netherlands) wage restraint is generally viewed as a necessary
component of worksharing agreements. Altogether, the theoretical evidence (and opinions)
on the wage effects of shorter hours appears to be mixed but the empirical evidence
appears to point in the direction of shorter hours increasing wages. The extent to which
this (possible) increase in wages offsets any positive effects of worksharing on employ-
ment is investigated in Section 3.

2.3. Heterogeneity, labour supply and inflation

Freeman (1998) suggests that one of the principal reasons for a limited success of a
worksharing policy lies in the difference between the skills of unemployed and employed
persons. The studies referred to above have implicitly assumed that all workers are
homogeneous, i.e. their skills are identical or differ only in level, not in type. To the extent
that the unemployed are different from the employed, what matters is whether their skills
are complements or substitutes. Suppose for instance that most of the unemployed are
unskilled and that skilled and unskilled labour are complements. It is then conceivable that
a reduction in work time of skilled labour actually decreases the demand for unskilled
labour and therefore for the unemployed (Freeman, 1998; Bauer and Zimmermann, 1999).
Freeman (1998) also mentions the labour supply response as one of the principal
reasons behind a limited success of worksharing policies. In the situation where a
reduction of standard hours is accompanied by a fall in income, and the household has
a preference for income over leisure, the reduction in the official working time of one
298 A. Kapteyn et al. / Labour Economics 11 (2004) 293–313

household member may increase the labour supply of other household members.
Alternatively, the household member whose hours are cut may start looking for a second
job. If there are demand constraints on extending the working time of persons already
employed, additional members of the household may start looking for work, and thus there
will be an ‘‘added worker effect’’. Riechel (1986) reports on high growth in the
participation rate of women and in the preparedness to work overtime in the Netherlands
during the period in which income losses were observed. In the author’s view, this trend
suggests a substantial added worker effect. Kooreman and Kapteyn (1985) have investi-
gated the interaction of labour supply of spouses in the context of a household labour
supply model. In line with Riechel’s observation, they estimate that the hours worked by
the female partner will increase just enough to maintain the level of household income of
before the mandatory reduction of hours worked by the male partner. Moreover, as female
wage rates are generally lower than male wage rates, the additional number of hours
worked by the female in the household will on average be more than the reduction in hours
by the male. Similarly, Friesen (2002) reports substantially more moonlighting in
Canadian jurisdictions with lower standard working hours. In contrast with these findings,
Hunt (1998) reports that a by-product of the reduction in standard hours of full-time male
workers in Germany was a small reduction in the hours of their wives, possibly due to
complementarity of leisure between spouses.
Layard et al. (1991) argue that the reduction in working hours creates an inflationary
pressure by (initially) reducing unemployment, hence an increase in wages. Since the
changes in working hours do not affect the mix of unemployment and inflation that the
government prefers, it is very likely that the government allows unemployment to rise
again in order to control inflation. The authors conclude that ‘‘the net result of shorter
working hours is then no reduction in unemployment, but a reduction in output’’.

3. Empirical analysis

The principal aim of the empirical analysis is to study whether or not employment is
affected by a reduction in working hours in the long run. As has become clear in the
previous section, various studies have been undertaken to assess the employment effects of
worksharing. Generally, these studies are of a partial nature, as they either look at particular
sectors or firms in establishing whether jobs have been created or saved or they consider
specific aspects only, e.g. whether wages have risen as a result of worksharing. The sector-
or firm-level studies are incomplete in the sense that there are several mechanisms involved
that cannot be taken into account. For instance, in a firm-level study one has to abstract
from the effects of worksharing in a single firm on employment in other firms. Some studies
exploit the phenomenon of ‘‘natural experiments’’, as in Crépon and Kramarz (2002) who
analyse features of the work time reduction in France around 1982 to conclude that the
mandatory reduction of the working week in France reduced employment.
Since potentially the effects of worksharing are complicated and wide-ranging, the
natural way to study these effects is by looking at whole economies over time. For this
reason, the empirical analysis carried out in this study is based on a comparison of
economies over time and across countries. This emphasis on studying the overall impact
 A. Kapteyn et al. / Labour Economics 11 (2004) 293–313 299

of working time reduction can be seen as our main empirical contribution to the existing
empirical literature. By looking at an aggregate level, one can accommodate several of the
feedbacks and secondary effects that cannot be dealt with by analyses at the firm or sector
level. The consideration of particular aspects, and in particular the wage effects, is useful
to gain insight in the importance of certain mechanisms, but clearly they will also not tell
the whole story. As discussed in the previous section, worksharing may affect production
and inflation. The empirical analysis does treat production and inflation as potentially
endogenous explanatory variables but data limitations prevent us from estimating the long
run effects of a reduction in working hours on production. In this respect, we present a
partial analysis. Keeping this caveat in mind, the analysis does provide new insights in the
long-run effects of a reduction in working hours on wages and employment and the central
role of wages in the relationship between employment and working hours. The approach
adopted here takes full account of the simultaneity between employment, wages and
hours.
It is of importance to note that, as discussed in the previous section, the form of
worksharing considered in this study is that of shorter hours and throughout this section
we make inferences about the effectiveness of worksharing based on the long-run effects
of a reduction in hours on employment. The implicit assumption made here is that a
mandatory reduction of the working week (i.e. worksharing) results in a similar reduction
in actual working hours. Strong empirical support for making this assumption has been
presented in Section 2.1. The outline of this section is as follows. Section 3.1 describes the
data. Section 3.2 formulates the empirical model and Section 3.3 presents and discusses
the estimation results.

3.1. Data

Annual data have been gathered on the employment rate, working hours, wage rates,
Gross Domestic Products (GDP), Consumer Price Indices (CPI), and the shares of the
population between 15 and 65 for 16 OECD countries. The data cover the time period
1960 –2001.
Statistics on before tax average wages and CPI are taken from the International
Financial Statistics of the International Monetary Fund (1980, 1997, 2002). The CPI is
a Laspeyres price index of the cost of living and we take 1990 as reference year
(1990 = 100). Statistics on employment and the share of the population between 15 and
65 years of age are taken from the Labour Force Statistics of the Organization for
Economic Co-operation and Development (1988, 2002). Employment is defined as the
number of persons in paid work or self-employment. International comparable statistics on
GDP, annual hours of work and population size have been provided by the Groningen
Growth and Development Centre (GGDC)5. Real GDP is in 1990 US dollars and corrected
for differences across countries in purchasing power. Hours of work are the average actual
working hours per year of the employed population. GGDC does not provide yearly
information on hours of work before 1979. Hours of work information over the years

5
We use data from the ‘‘Total Economy Database’’ and a detailed description of these data can be found on:
http://www.eco.rug.nl/ggdc. The GGDC collects data from the official international statistics.
300 A. Kapteyn et al. / Labour Economics 11 (2004) 293–313

Table 1
Observation period per country
Country Period Number of observations
Australia 1971 – 2001 31
Canada 1963 – 2001 39
France 1970 – 2001 32
West Germany 1963 – 1990 28
Greece 1979 – 1998 20
Ireland 1979 – 2001 23
Italy 1966 – 2001 36
Japan 1971 – 2000 30
Netherlands 1971 – 2001 31
New Zealand 1971 – 2001 31
Norway 1963 – 1996 34
Portugal 1974 – 1993 20
Spain 1977 – 2001 25
Sweden 1963 – 2001 39
United Kingdom 1970 – 2001 32
United States 1960 – 2001 42
All 493

1960– 1978 have been taken—if available—from the Labour Force Statistics6 (OECD)
whenever the hours information over the later years of the OECD matched those of the
GGDC, since only then we can be certain that the source of information is the same. Given
these statistics, we define the employment rate as employment over the population
between 15 and 65 years of age, the wage rate as the average real hourly wage rate
(index, 1990 = 100) and working hours as the average number of actual hours worked per
week. In the empirical analysis, a logarithmic specification together with the country-
specific effects will control for differences in purchasing power and the fact we used wage
rate indices rather than real wage rates.
The raw data contains information on 22 OECD countries. Insufficient information is
available for Austria, Belgium, Denmark, Finland, Luxembourg and Switzerland and we
therefore exclude these from the analysis. For the remaining 16 countries (see Table 1), not
all the necessary information is available in every year. Of the potential 672 observations,
i.e. 42 yearly observations for each of the 16 countries, 168 observations have been
excluded because of missing values. Most of the missing values are on the working hours
or the wage rate in the earlier years of the observation period. The statistics for Germany
are influenced by the reunification of East and West Germany and for this reason only
observations of West Germany up to 1990 are included (11 exclusions). Altogether, these
years and countries form 493 observations. Table 1 reports the observation periods for the
16 countries used in the empirical analysis.
Table 2 reports averages for the employment rate, weekly hours of work and the share
of the population between 15 and 65 years of age for three sub-periods: the years up to and

6
We used the OECD website: http://www1.oecd.org/scripts/cde/viewbase.asp?DBNAME = lfs_data.
 A. Kapteyn et al. / Labour Economics 11 (2004) 293–313 301

Table 2
Average employment rate, weekly hours of work and the share of the population between 15 and 65 years of age
Employment rate (%) Weekly hours of work Share of the population
(actually worked) between 15 and 65 (%)
Period < 1980 1981 – 1990 >1990 < 1980 1981 – 1990 >1990 < 1980 1981 – 1990 >1990
Australia 66.1 65.2 67.7 36.7 35.9 35.7 64.0 66.2 66.7
Canada 61.4 66.9 67.7 36.9 34.5 34.2 62.8 68.1 67.9
France 63.6 59.0 58.9 36.0 32.5 31.0 62.8 65.5 65.3
West 66.7 62.3 – 36.1 32.0 – 64.6 69.4 –
Germany
Greece 54.4 55.0 53.9 38.6 37.2 37.2 63.9 65.8 67.5
Ireland 57.6 52.8 57.7 39.3 37.1 34.4 58.8 60.1 64.7
Italy 53.6 52.9 52.3 34.8 32.3 31.4 66.3 68.7 68.4
Japan 69.9 70.9 74.5 41.4 40.2 36.3 67.8 68.5 69.2
Netherlands 53.4 54.6 66.8 30.9 28.3 26.7 64.2 68.2 68.3
New 64.1 65.7 68.9 34.7 34.4 34.0 61.4 65.0 65.4
Zealand
Norway 65.6 74.3 72.0 33.5 28.2 27.4 62.8 64.2 64.6
Portugal 64.3 64.4 67.5 37.5 36.1 34.6 63.0 65.0 67.5
Spain 52.4 46.6 49.9 38.5 36.0 35.0 62.9 64.9 68.0
Sweden 74.5 79.7 72.4 32.2 29.4 30.8 65.1 64.5 64.0
United 69.6 66.6 69.3 35.9 33.7 33.3 63.0 65.3 65.1
Kingdom
United 62.6 68.3 72.0 37.0 35.2 35.3 62.1 66.3 65.7
States

including 1980, the years 1981 –1990 and the years from 1991 onwards.7 For the same
sub-periods, Table 3 reports percentage changes for all variables. Tables 2 and 3 show that
the levels and trends over time of the employment rate differ considerably across
countries. The English-speaking countries have relatively high employment rates and
have remarkable similar employment rates at the end of the 1990s. Japan experienced high
employment rates over the entire observation period. Up to the end of the 1980s, Norway
and Sweden experienced the highest employment rates among the 16 countries and their
employment rates decreased thereafter to the level of English-speaking countries. The
employment rate in the Netherlands increased rapidly during the 1980s and 1990s up to
the level of English-speaking countries. In the 1990s, France, Greece, Italy and Spain have
notably low employment rates. Table 3 shows that most countries, with the exceptions of
New Zealand and Portugal, experienced high real wage growth during the 1970s and a
slowdown thereafter. Table 2 shows that the levels of working hours differ considerably
across countries and that all countries experienced a downward trend in working hours.
However, the downward trend has come to a halt at the end of the 1970s for the English-
speaking countries—with the exception of Ireland—while almost all European countries
continue to decrease working hours up to the end of the 1990s. The exception is Sweden,
which has experienced an increase in the average working hours during the 1980s and
1990s. Table 3 shows that the real GDP per capita is generally increasing with time.
Especially Ireland—the Celtic tiger—has experienced incredible growth since the 1980s.
7
For the remaining three variables, we only observe indices.
302 A. Kapteyn et al. / Labour Economics 11 (2004) 293–313

Table 3
Average percentage changes per year for all variables
Employment rate Real hourly wage rate Weekly hours of work
(actual worked)
Period < 1980 1981 – 1990 >1990 < 1980 1981 – 1990 >1990 < 1980 1981 – 1990 >1990
Australia
0.25 0.38 0.26 2.32 0.02 1.65
0.65
0.07
0.14
Canada 0.72 0.48 0.01 2.46 0.21 0.35
0.75
0.08
0.04
France
0.28
0.55 0.44 4.84 1.47 1.26
0.88
0.80
0.72
West
0.37
0.04 – 4.85 2.03 –
0.96
0.83 –
Germany
Greece 0.08 0.03 0.19 1.75 1.12 0.18
0.37
0.49 0.05
Ireland
2.01
0.66 1.87 1.65 1.33 3.00
1.98
0.53
1.27
Italy
0.04 0.05 0.01 5.02 1.04 0.05
0.71
0.25
0.38
Japan 0.01 0.30 0.33 3.78 1.85 1.87
0.63
0.44
1.10
Netherlands
0.51 1.31 1.61 2.04 0.26 0.34
0.75
1.05
0.26
New
0.01 0.33 0.69 0.66
1.84
0.21
0.25
0.19
0.02
Zealand
Norway 1.02
0.03 0.39 2.96 0.97 1.34
1.49
0.55
0.29
Portugal
1.15 1.02
2.52
4.00 0.62 1.37
1.40
0.24
1.74
Spain
3.40 0.00 1.30 4.48 1.17 0.88
1.56
0.95
0.04
Sweden 0.55 0.24
0.93 1.71 0.84 1.59
1.25 0.28 0.31
United
0.07 0.27
0.02 2.50 2.55 1.95
0.93
0.02
0.30
Kingdom
United States 0.25 0.89
0.10 1.14
0.72 0.19
0.45 0.08
0.09

Real gross domestic product Consumer price index Share of the population
between 15 and 65
Period < 1980 1981 – 1990 >1990 < 1980 1981 – 1990 >1990 < 1980 1981 – 1990 >1990
Australia 1.80 1.69 2.24 9.76 7.50 2.34 0.38 0.27 0.00
Canada 2.91 1.53 1.45 5.70 5.57 1.99 0.85 0.07 0.08
France 2.54 1.78 1.37 8.78 5.86 1.72 0.22 0.32
0.10
West 2.96 1.88 – 3.80 2.54 – 0.00 0.54 –
Germany
Greece 0.74 1.05 1.43 19.89 15.91 9.75 0.31 0.46 0.13
Ireland 2.03 3.16 5.84 15.51 7.00 2.66 0.17 0.42 0.86
Italy 3.53 2.13 1.38 9.48 8.70 3.50
0.03 0.32
0.17
Japan 3.14 3.30 1.14 8.35 2.00 0.82
0.26 0.35
0.28
Netherlands 1.95 1.58 2.07 6.78 2.36 2.57 0.60 0.40
0.15
New 0.72 1.03 1.40 11.21 9.56 1.80 0.59 0.40
0.04
Zealand
Norway 3.69 1.96 3.32 6.46 7.06 2.15
0.03 0.25
0.03
Portugal 1.47 2.90 1.12 17.67 14.48 8.27 0.37 0.48 0.79
Spain 0.19 2.47 2.30 14.59 8.46 3.70 0.37 0.49 0.26
Sweden 2.36 1.67 1.34 6.59 7.05 2.25
0.22 0.03 0.06
United 1.79 2.34 1.89 11.95 6.12 2.85 0.19 0.18 0.06
Kingdom
United 2.42 2.18 1.68 4.94 4.48 2.72 0.64
0.05 0.07
States
 A. Kapteyn et al. / Labour Economics 11 (2004) 293–313 303

Table 3 shows the increase in the Consumer Price Index for the three sub-periods. Inflation
has clearly gone down in all countries since the 1970s. Table 2 shows that the share of the
population between 15 and 65 has gone up for most countries over the observation period
but the patterns clearly differ across countries (see also Table 3).

3.2. Econometric model

As discussed in Section 2.2, the wage rate plays a central role in the relationship
between working hours and the employment rate. A reduction in working hours may cause
an increase in the wage rate and, consequently, reduce or even neutralize the presumably
positive direct effect of a reduction in working hours on the employment rate. Further-
more, it may be the case that the causality runs in the opposite direction as a low level of
employment may trigger a policy of reducing working hours. Given these considerations,
we take fully into account the interrelationship between the employment rate, the wage
rate and working hours. To be able to identify the long-run effects we include in our
analysis, the Consumer Price Index (CPI), the share of the population between 15 and 65
years of age (Share 15 – 65), and real Gross Domestic Product (GDP) per capita as
explanatory variables. As discussed in the introduction of Section 3, simultaneity between
all these variables is taken into account by using an Instrumental Variable estimator. As
instruments, we use the lagged values of all explanatory variables. In the empirical
analysis, a logarithmic transformation is applied to all six variables.
Let us assume that a long-run relationship exists between the vector of dependent
variables Yit and explanatory variables Zit and is given by:

ðI
Ui ÞYit ¼ H0;i þ Hi Zit þ Uit i ¼ 1; . . . ; N ; t ¼ ti0 ; . . . ; tiT : ð1Þ

Yit is a vector containing (log-) employment rate, (log-) wage rate and (log) working hours
in period t of country i, and Zit is a vector containing (log-) GDP, (log-) CPI and (log-)
Share 15– 65 in period t of country i. N is the number of countries and T is the number of
time periods. Uit is a vector of error terms, which are assumed to be distributed
independently across time and countries. The parameters of interest are the elements of
Ui and Hi and are interpreted as percentage changes in the dependent variable in the long-
run as a result of a 1% change in the explanatory variable since we use a logarithmic
transformation of all variables in the system. Ui is a (3  3)-matrix with zeros on the
diagonal, H0,i is a (3  1)-vector of intercepts, and Hi is a (3  3)-matrix. Several elements
of Hi are set equal to zero to satisfy the rank and order conditions for identification (see,
e.g., Davidson and MacKinnon, 1993). We return to the issue of identification below.
At this stage, it is convenient to write down the long-run relationship between a single
endogenous variable (denoted by yit) and the remaining (endogenous) variables (denoted
by Xit) as follows:

yit ¼ h0;1 þ XitVhi þ uit i ¼ 1; ::; N ; t ¼ ti0 ; ::; tiT : ð2Þ

There is, of course, a one-to-one correspondence between the parameters in Eq. (2)
and the parameters in Eq. (1). The variables included in Eq. (2) may be non-stationary
304 A. Kapteyn et al. / Labour Economics 11 (2004) 293–313

but are assumed cointegrated.8 This means the error term uit is assumed to be
stationary.
The data generating process is taken to be an AutoRegressive Distributed Lag model
(ARDL( p,q)):
X
p X
q
yit ¼ li þ ci t þ kij yit
j þ dijVXit
j þ ei;t i ¼ 1; ::; N ; t ¼ ti0 ; ::; tiT : ð3Þ
j¼1 j¼0

The error term is assumed distributed independently across time and countries. The
distributed lag orders on yit and Xit, i.e. the values of p and q, are chosen in such a way that
the error terms are independent across time, i.e. the errors terms are serially uncorrelated.
Eq. (3) can be written in an error-correction equation from which we can identify both the
long- and short-run effects:
X
p
1 X
q
1
dyit ¼ li þ ci t þ /i ðyit
1
hiVXit Þ þ k*ij dyit
j þ d*ij dXit
j þ ei;t ; ð4Þ
j¼1 j¼0

with:

X
p X
q X
p X
q
/i ¼
ð1
kij Þ; hi ¼ dij =/i ; k*ij ¼
kim ; d*ij ¼
dim ;
j¼1 j¼0 m¼jþ1 m¼jþ1

i ¼ 1; ::; N ; t ¼ ti0 ; ::; tiT :

The intercept term h0,i of Eq. (2) is absorbed in the country specific intercept in
Eq. (4).
Ideally, we would like to estimate Eq. (4) for each country separately and subsequently
estimate the average long-run elasticities. This approach is better known as a Mean Group
Estimator (MGE, Swamy, 1970). However, as shown by Hsiao et al. (1999), the MGE
performs badly in small samples (both T and N are considered to be small in our case). An
alternative is to a priori restrict all parameters in Eq. (4) to be the same across countries.
This pooling of the data essentially imposes the restriction of slope homogeneity. Pesaran
and Smith (1995) show that conventional estimators may yield inconsistent parameter
estimates when in fact slope homogeneity does not hold. In our empirical application, slope
heterogeneity may arise from the fact that institutional settings are different across the
countries. This causes labour markets in different countries to react differently to changes
in, for instance, working hours or inflation in the short run.
Pesaran et al. (1999) suggest an alternative estimator. Basically, they assume the long-
run effects to be constant across countries while the short-run effects are allowed to differ
across countries. This they call the Pooled Mean Group (PMG) estimator. They discuss the
asymptotic properties of PMG and show that PMG does a better job in relatively small
samples compared to a MGE or a dynamic fixed effect model. For this reason, we choose

8
Hsiao (1997) provides an excellent discussion on the issues of identification of long-run effects and
cointegration.
 A. Kapteyn et al. / Labour Economics 11 (2004) 293–313 305

to employ the PMG estimator. Effectively, it means we impose the following restriction on
the model:

hi ¼ h; i ¼ 1; ::; N : ð5Þ

Estimates of the elements of h are the average long-run effects. Imposing restriction (5) on
Eq. (4) yields the following equation:

X
p
1 X
q
1
dyi;t ¼ li þ ci t þ /i ðyi;t
1
h VXi;t Þ þ k*ij dyi;t
j þ d*ij dXi;t
j þ ei;t : ð6Þ
j¼1 j¼0

To estimate Eq. (6), an iterative estimation procedure as proposed by Pesaran et al. (1999)
has been implemented. The parameters of interest for this paper are the long-run effects.
Given the long-run effects, we are able to quantify the total effect of a change in working
hours on the employment rate. Moreover, we can analyse the central role of the wage rate
in this.
We estimate Eq. (6) using an Instrumental Variables estimator. We instrument all six
variables in our model. In order to prevent any biases due to correlated measurement errors
(Holtz-Eakin et al., 1988), the instruments are the lagged values of each variable of the
periods this variable is not included as an explanatory variable in the system. Test statistics
for the presence of a unit root in each of the six variables are reported in Table 2. The
results in Table 4 show that for all series except the wage rate the null hypothesis of a unit
root is accepted. We therefore assume that these series are non-stationary and integrated of
order 1. The standard errors are calculated taking into account the possibility that the
regressors are I(1) and the error terms are heteroscedastic.

3.3. Empirical results

Eq. (6) is estimated for each of the three endogenous variables: employment rate, wage
rate and working hours. GDP, CPI and Share 15 –65 are considered to be endogenous
explanatory variables. As noted in Section 3.2, we need to impose several restrictions in
order to satisfy the rank and order conditions for identification. The following restrictions
are imposed on the model: CPI is excluded from the employment rate and working hours
equations, the Share 15 –65 is excluded from the wage rate and working hours equations.
For the employment rate, an ARDL(1,1), for the wage rate an ARDL(2,1) and for working

Table 4
Panel unit root tests, Im et al. (2003)
t-bar statistic Critical value Conclusion
Ln(Employment Rate)
2.29
2.41 I(1)
Ln(Wage Rate)
2.44
2.28 –
Ln(Working Hours)
2.03
2.41 I(1)
Ln(Gross Domestic Product)
2.18
2.28 I(1)
Ln(Share Population 15 – 64)
2.27
2.28 I(1)
Ln(Consumer Price Index)
1.83
2.41 I(1)
H0: series has a unit root.
306 A. Kapteyn et al. / Labour Economics 11 (2004) 293–313

Table 5
Long-run relationshipsa
Partial elasticities Ln(Working Hours) Ln(Employment Rate) Ln(Wage Rate)
Ln(Employment Rate) 0.22 (0.12)
0.01 (0.04)
Ln(Wage Rate)
0.43 (0.07)
0.11 (0.01)
Ln(Working Hours)
0.34 (0.18)
0.40 (0.13)
Ln(Gross Domestic Product) 1.39 (0.11) 0.47 (0.12)
Ln(Share Population 15 – 64)
0.85 (0.18)
Ln(Consumer Price Index)
0.05 (0.04)
R-Squaredb 0.62 0.63 0.54
Over-Identification Test (d.f.)b 6.44 (5) 6.41 (4) 9.73 (8)
Cointegration Testc
2.65
3.00
2.62
Test on Cross-Country Restrictions (d.f.)b 2.46 (4) 3.26 (4) 3.33 (2)
a
Standard errors are in parentheses.
b
The goodness-of-fit statistic R2, the over-identification test for testing the validity of the instruments and the
test on cross-country restrictions pertain to Eq. (6). Degrees of freedom (d.f.) in parentheses and critical values
2 2 2 2
are: v0.95 (2) = 5.99, v0.95 (4) = 9.49, v0.95 (5) = 11.1 and v0.95 (8) = 15.5.
c
The Cointegration Test pertains to Eq. (2). Critical value:
2.28, H0: no cointegration.

hours an ARDL(2,1) are chosen, based on the model specification tests (see Appendix A).
The system is over-identified. However, adding a fourth equation to the system would
yield a violation of the rank condition.9 As discussed above, we use as instruments the
third and fourth period lagged values of the employment rate, wage rate, working hours
and Share 15 – 65, and the second, third and fourth lagged values of GDP and CPI. In total,
we have 14 instruments, excluding the constant and trend.
The estimates of the long-run coefficients, as given by the h’s in Eq. (6), are reported in
Table 5. For completeness, estimates of the country-specific effects (li + h0,i), trend (ci),
the short-run parameters (k*ij and d*ij) and the adjustment coefficient (/i) are reported in
Appendix A. Furthermore, Appendix A reports the R2 and a serial correlation test for each
equation and country. Before turning to the estimation results of the long-run relationships,
we discuss briefly several model specification tests reported at the bottom of Table 5. To
validate the instruments used, Table 5 presents at the bottom an over-identification test for
each equation. The null-hypothesis is that the instruments are orthogonal to the error
terms, which is a necessary condition for consistency. This null-hypothesis is accepted for
each equation. As mentioned above in the model outline, the two crucial assumptions we
make are that a long-run relationship exists and Eq. (2) is a cointegrating relationship. A
test of the existence of a long-run relationship for each country is equivalent to testing the
null-hypothesis /i = 0 for each country. The test results reported in Appendix A show that
for most countries we reject the null-hypothesis for each equation, which is in favour of
the existence of a long-run relationship. Furthermore, the panel unit root tests on the error
term in Eq. (2) (bottom of Table 5) are in favour of a cointegrating relationship for each of
the equations. Finally, the restrictions imposed on the system of constant long-run effects
across countries (Eq. (5)) are tested in the last row of Table 5. These restrictions are not
rejected.

9
For example, adding an equation explaining the long-run effect of working hours on GDP would result in a
violation of the rank condition for the employment rate equation.
 A. Kapteyn et al. / Labour Economics 11 (2004) 293–313 307

Table 6
The long-run effects of an exogenous changea
Cells: % Employment rate Wage rate Working hours
A 1% change in:
Employment Rate 0.92 (0.04) 0.22 (0.10)
0.03 (0.04)
Wage Rate
0.38 (0.06) 0.96 (0.05)
0.10 (0.02)
Working Hours
0.16 (0.19)
0.46 (0.14) 1.05 (0.02)
a
Standard errors are in parentheses.

The estimation results reported in Table 5 show that most coefficients are in line with
the theoretical predictions as discussed in Section 2. A 1% increase in the wage rate results
in a 0.43% decrease in the employment rate and a 0.11% decrease in working hours. A 1%
increase in the employment rate, inducing a tighter labour market, results in a 0.22%
increase in the wage rate and has virtually no effect on working hours. A 1% reduction in
working hours results in a 0.34% increase in the employment rate. This effect is positive
and (marginally) significant. Furthermore, a 1% reduction in working hours results in a
0.40% increase in the real wage rate.
Table 5 reports the partial effects. To analyse the total effects of a reduction in working
hours on the employment rate, i.e. taking for instance wage effects into account, we have
to solve for the reduced form for employment, wages and working hours. Table 6 presents
the reduced form effects. Since the equations are in logs, the reduced form coefficients in
Table 6 can be interpreted as elasticities. The second column in Table 6 shows that a 1%
reduction in working hours results, in the long run, in a 0.46% increase in the real hourly
wage rate. This implies that weekly earnings of workers are partly compensated for the
loss in working hours. This compensation diminishes the partial effect of a decrease in
working hours on the employment rate. The partial effect according to Table 5 was 0.34%.
But the total effect of a 1% reduction in working hours according to Table 6 is only an
insignificant 0.16% increase in the employment rate.
Thus, the picture emerges that an exogenous reduction in working hours causes an
increase in the real wage rate and, consequently, eliminates most of the positive direct
effect of a reduction in working hours on the employment rate (Table 5) and turns it
into an (insignificant) effect (Table 6). The empirical results stress the importance of
taking the simultaneity between employment rate, wage rate and working hours into
account when addressing the effects of a reduction in working hours on the employment
rate.

4. Concluding remarks

This paper considers both the theoretical and the empirical cases to evaluate work-
sharing as a policy tool for promoting employment (or reducing unemployment). The
insights obtained from the literature review are inconclusive as to the efficacy of
worksharing as a means to promote employment. Our empirical analysis does not provide
support for the proposition that worksharing would reduce unemployment. The results
show a positive direct effect on employment of a reduction in working hours but this
308 A. Kapteyn et al. / Labour Economics 11 (2004) 293–313

reduces to a small insignificant long-run effect on employment due to an increase in

wages. These results are in line with recent empirical results from recent country-specific
studies, in particular for France (Crépon and Kramarz, 2002), for Germany (Hunt, 1999)
and for Sweden (Jacobson and Ohlsson, 2000).
Obviously, all these considerations do not preclude one to prefer shorter hours as a
means of attaining additional leisure by sacrificing income. To facilitate such possibilities
at an individual level may be welfare enhancing, just as it may be welfare enhancing to
create possibilities for people to work longer hours and earn more, if they wish to do so.
Additionally, other arguments have been advanced in favour of worksharing, for instance
that it may generate greater emancipation of women. These other arguments in favour of
worksharing need to be judged on their own merit and may form a compelling reason to
work shorter hours.
But if one wants to increase employment, other measures are probably much more
effective than worksharing.

Acknowledgements

This paper grew out of the research project Working Time and Employment
(Arbeidsduur en Werkgelegenheid), commissioned by the Netherlands Scientific Council
for Government Policy (Wetenschappelijke Raad voor het Regeringsbeleid). The authors
are grateful to Krijn van Beek of the Council, for fruitful discussions on different versions
of this report. Comments on earlier versions by Rob Alessie and Klaas de Vos, and
comments by Jan van Ours and two anonymous referees are also gratefully acknowledged.
All correspondence to the first author: RAND, P.O. Box 2138, Santa Monica CA90407.

Appendix A . Estimates of the country specific effects (li+h0,i), trends (ci), the short-
run parameters (k*ij and d*)
ij and the adjustment coefficient /i, Eq. (6)

Notation: E = ln(employment rate), W = ln(wage rate), H = ln(working hours),

G = ln(GDP), S=(Share of the population between 15 and 65). The abbreviations of the
countries correspond row-wise to the list of countries in Table 1. Furthermore, p.e. denotes
the parameter estimate and s.e. the corresponding standard error.
Independence across time of the error term in Eq. (6) is a necessary condition for
obtaining consistent parameter estimates. This condition can be satisfied by choosing the
distributed lag in such a way that the model passes a test on serial correlation. The serial
correlation test is based on the estimated residuals of Eq. (6) and the fact we employ an
Instrumental Variables estimator is taken into account (Davidson and MacKinnon, 1993,
Chapter 10). Results not reported here clearly showed that a ARDL(1,1) representation
for the wage rate and working hours is not sufficient in order to pass the serial
correlation tests for most countries. Choosing an ARDL(2,1) for the wage rate and
working hours solved the most serious serial correlation problems. The results in Tables
A1 –3 show that for most countries the three equations pass the test of no serial
correlation.
Table A1
Employment rate equation

A. Kapteyn et al. / Labour Economics 11 (2004) 293–313

Constant Trend DW DH DG DS Adjustment R2 Serial
coefficient correlation
p.e. s.e. p.e. s.e. p.e. s.e. p.e. s.e. p.e. s.e. p.e. s.e. p.e. s.e. t-test

AU 0.35 0.25
0.01 0.00
0.22 0.19 0.00 0.00 0.53 0.16 0.31 0.35
0.69 0.12 0.77 0.39
CN 1.00 1.49
1.84 0.68
0.42 0.50
0.19 0.52 1.87 1.76
0.42 0.45
0.28 0.11 0.47
0.18
FR 0.00 0.00 0.00 0.10
0.24 0.28 0.07 0.05 0.00 0.01
0.53 0.33
0.02 0.08 0.83 0.54
DE
1.42 0.67 0.86 0.53
2.24 1.71 0.00 0.20
0.14 0.53
6.70 2.40
0.36 0.08 0.85
0.18
GR 0.03 0.07 0.39 0.22
0.01 0.00
0.09 0.14 0.11 0.10
0.01 0.00 0.07 0.11 0.41
0.21
IR 0.64 0.18 0.04 1.23
4.37 1.16
1.57 0.32 0.32 0.56
3.64 1.23
0.02 0.11 0.76
0.08
IT
0.62 0.13 0.00 0.00
0.18 0.21
0.01 0.00 0.10 0.19 0.90 0.31
0.16 0.11 0.32 11.6
JP
1.26 0.60
0.10 0.61 0.36 0.66
2.37 0.70
0.19 0.86 0.88 1.15
0.10 0.04 0.58 0.71
NL
0.01 0.00 0.00 0.32 0.18 0.23 0.03 0.09 0.00 0.00
0.25 0.39
0.54 0.15 0.52 0.10
NZ
3.46 0.69 0.56 0.59
0.31 1.26 0.00 0.20
1.07 0.77
1.46 2.78
0.57 0.12 0.54 1.47
NW
0.37 0.16 1.46 0.22 0.00 0.00 0.01 0.20
0.15 0.08
0.01 0.00
0.30 0.09 0.56 0.50
PT 0.51 0.55
2.77 1.24
1.87 0.81
6.09 2.20
0.09 0.20
3.67 1.17
0.01 0.11 0.41 0.26
ES 0.46 0.19 0.00 0.00 0.16 0.07 0.00 0.00 0.19 0.11 0.21 0.12 0.08 0.11 0.89
0.59
SD 0.89 0.68 0.43 0.69
0.25 0.16 0.48 0.67
1.01 0.35
1.12 0.43
0.22 0.09 0.59 1.73
UK 0.00 0.00 0.03 0.12 0.59 0.09 0.35 0.34 0.00 0.00 0.09 0.18
0.54 0.07 0.90 0.10
US
0.16 0.43
0.68 0.33
1.24 0.67 0.31 0.51
0.60 0.26 0.71 1.50
0.02 0.06 0.49 1.15

309
 310
Table A2
Wage rate equation

A. Kapteyn et al. / Labour Economics 11 (2004) 293–313

Constant Trend DW lagged DE DH DG DC Adjustment R2 Serial
coefficient correlation
p.e. s.e. p.e. s.e. p.e. s.e. p.e. s.e. p.e. s.e. p.e. s.e. p.e. s.e. p.e. s.e. t-test

AU 0.00 0.00
0.03 0.61 0.13 0.28
0.31 0.59
0.21 0.32 0.45 0.20 0.36 0.20
0.28 0.11 0.56 1.36
CN 0.46 0.21
0.10 0.42
0.34 0.36 0.59 0.75 0.00 0.01 0.34 0.17
1.72 0.75
0.20 0.06 0.67 0.96
FR 0.02 0.23 0.00 0.01
1.70 0.90 0.07 0.24 1.53 0.73
1.38 0.50 0.17 0.26
0.15 0.08 0.70
0.31
DE 0.08 0.30 1.52 0.79 0.44 0.47 0.00 0.00 0.37 0.08
0.39 0.53
0.47 0.20
0.12 0.09 0.63 0.52
GR 0.25 0.62
0.51 0.20
0.35 0.22 0.20 0.18
0.01 0.13 0.32 0.24 0.00 0.00
0.71 0.19 0.74 0.12
IR
1.44 0.53
0.40 0.18 0.00 0.00 0.45 0.16
0.55 0.19 0.14 0.16 0.46 0.31
0.37 0.09 0.90
1.56
IT
0.96 0.27 0.38 0.37 0.56 0.32 0.63 0.55
0.35 0.09 0.00 0.00 0.59 0.23
0.21 0.06 0.71 0.88
JP 0.00 0.00 0.24 0.27 0.32 0.25
0.24 0.70
0.52 0.16 0.47 0.39
0.05 0.32
0.30 0.15 0.60 0.92
NL 0.85 0.49
0.63 0.19
1.34 0.63 0.02 0.37 0.00 0.00 0.36 0.12
1.35 0.82
0.69 0.10 0.82 0.41
NZ 0.56 0.16 0.00 0.00 0.34 0.59 0.22 0.33 0.89 0.41
0.24 0.14 0.23 0.31
0.14 0.11 0.49 0.43
NW
0.70 0.34 0.40 0.20 0.82 0.47 0.00 0.00
0.31 0.22 0.48 0.24 0.09 0.16
0.24 0.09 0.55 1.21
PT
0.78 0.59
0.26 0.25 0.44 0.16 0.14 0.13 0.01 0.44
0.54 0.16 0.00 0.00
0.69 0.21 0.62
0.73
ES 0.22 0.27 2.18 0.85 0.00 0.00 0.44 0.15 1.13 1.10
0.60 0.21 0.32 0.25
0.11 0.08 0.63 0.89
SD
0.30 0.15 1.31 0.94 0.30 0.20
0.27 0.47
0.31 0.31
0.01 0.00 0.21 0.20
0.15 0.10 0.47 0.77
UK 0.00 0.00
1.89 0.89 0.30 0.23
0.44 0.47 0.07 0.14 1.50 0.69 0.02 0.66
0.48 0.14 0.45
0.14
US
0.13 0.14
1.36 0.36
0.79 1.20 0.66 0.38 0.00 0.00 0.64 0.18
1.77 1.24 0.08 0.06 0.58 0.52
Table A3
Working hours equation

A. Kapteyn et al. / Labour Economics 11 (2004) 293–313

Constant Trend DH lagged DE DW Adjustment coefficient R2 Serial
correlation
p.e. s.e. p.e. s.e. p.e. s.e. p.e. s.e. p.e. s.e. p.e. s.e.
t-test
AU 0.72 0.32 0.00 0.00 0.12 0.21 0.10 0.12 0.04 0.05
0.77 0.18 0.56 0.65
CN 0.43 0.20 2.28 0.59 0.16 0.10 0.05 0.07 0.00 0.00
0.27 0.09 0.39 0.28
FR
0.16 0.07 0.53 0.20 0.08 0.10
0.01 0.00 2.00 0.49
0.56 0.18 0.41 0.26
DE 0.13 0.06
0.01 0.10 0.00 0.00 4.29 0.88 0.54 0.22
1.04 0.21 0.56 0.38
GR 0.00 0.00
0.14 0.08 3.14 0.75
0.10 0.25
0.16 0.29
0.43 0.18 0.33
0.29
IR 0.41 0.14 0.00 0.00
0.03 0.37 0.06 0.23
0.05 0.15
0.30 0.10 0.76
0.96
IT
0.10 0.17 0.11 0.22 0.27 0.14
0.03 0.08 0.00 0.00
0.50 0.12 0.56
1.24
JP 0.49 0.12
0.06 0.13 0.15 0.11 0.00 0.00 0.73 0.33
0.17 0.08 0.46
0.05
NL
0.14 0.09 0.29 0.06 0.00 0.00 1.77 0.76 0.38 0.25
0.20 0.12 0.23
0.17
NZ 0.00 0.00 0.05 0.03 1.10 0.39 0.22 0.15
0.21 0.13
0.55 0.14 0.50 0.87
NW 1.17 0.30 0.00 0.00 0.99 0.34
0.03 0.10 0.39 0.20
0.03 0.05 0.56
0.38
PT 0.07 0.24 3.23 0.62
0.09 0.18
0.46 0.10 0.00 0.00
0.76 0.15 0.82
0.08
ES 0.27 0.12 0.17 0.10 0.17 0.14 0.00 0.00 0.78 0.51
0.18 0.08 0.68
1.56
SD 0.08 0.08 0.02 0.05 0.00 0.00 1.28 0.41 0.33 0.19
0.11 0.04 0.68
0.36
UK 0.00 0.00 0.20 0.12 2.35 0.74 0.44 0.19 0.02 0.04
0.29 0.07 0.62 1.41
US 0.63 0.28 0.00 0.00 0.47 0.21
0.01 0.09
0.08 0.05
0.15 0.07 0.43 2.93

311
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