Implications of the Non-Homogeneity of Standard and Overtime Hours on the Structure and Cyclical Adjustment of Labor Input
Introduction
Several studies have established that studying labor market phenomena associated with changes in the labor input without differentiating between workers and hours per worker as well between variable and quasi-fixed labor costs may produce seriously misleading inferences. The subject of the relative marginal productivities of the two components of labor input continues to be a detable issue with mixed empirical evidence.
The significance of the productivity of hours has been further evoked by the general working time debate, where the separate implications of changes in standard and overtime hours have been emphasized. It is noteworthy, however, that the numerous econometrical studies on returns to total hours are unable to
yield information on the returns to each dimension of the hoursinput that is of concern to those engaged in the debate. Then, although the arguments have been founded on the different role of standard and overtime hours, this distinction have been neglectect 1 in modelling the production activity.
In this paper, we distinguish between standard and overtime hours in the production function, too, and it is our purpose to examine the implications of this distinction on the optimal choice of workers and hours. The production function is specified in Section II. Section III focuses on the problem of how a cut in standard hours affects the optimal structure of labor input if the marginal product of total hours depends on their distribution between standard and overtime hours. In Section IV, a dynamic decision making model is developed for a demand-constrained firm to analyze the optimal adjustment of hours and employment during a business cycle, while Section V is to characterize the impacts of the productivity differences on the adjustment pattern of the firm.
- ISSN: 0357-9603
- ISBN: 951-9281-66-5
