Employment, hours and the welfare effects of intra-firm bargaining

Abstract

Bilateral bargaining between a multiple-worker firm and individual employees leads to overhiring. With a concave production function, the firm can reduce the marginal product by hiring an additional worker, thereby reducing the bargaining wage paid to all existing employees. We show that this externality is amplified when firms can adjust hours per worker as well as employment. Firms keep down workers' wage demands by reducing the number of hours per worker and the resulting labor disutility. Our finding is particularly relevant for European economies where hours adjustment plays an important role. R An earlier version of this paper was circulated under the title 'Employment, Hours and Optimal Monetary Policy'. We thank the associate editor, Antonella Trigari, and an anonymous referee for very useful comments and suggestions. We are grateful to

Going the Extra Mile: Effort by Workers and Job-Seekers

“…In many countries, hours worked per employee are an important margin along which labor varies (see the evidence in e.g. Ohanian and Raffo, 2012;Dossche et al, 2019). Moreover, variable labor utilization, or effort, has been proposed as a third labor margin to help explain the observed procyclicality of labor productivity.…”

Search and Multiple Jobholding

“…2 Using a Markov-chain model to estimate transitions in and out of multiple jobholding, we document that while full-time workers make up a larger share of multiple jobholding at the cross section, part-time workers are more likely to flow in and flow out (Appendix B of this paper). offers a simple solution to capture certain aspects of the intensive margin of labor adjustment (hours per worker) documented in Borowczyk-Martins and Lalé [2019], which the recent vintage of search models featuring fluctuations in hours (e.g., Bils et al [2012], Kudoh and Sasaki [2011], Dossche et al [2018], Kudoh et al [2019]) are unable to produce. 3 We believe this makes a useful, independent contribution of the paper to this class of models.…”

Search and Multiple Jobholding

“…(hours per worker) documented in Borowczyk-Martins and Lalé [2019], and that the recent vintage of search models featuring fluctuations in hours (e.g., Bils et al [2012], Kudoh and Sasaki [2011], Dossche et al [2018], Kudoh et al [2019]) is unable to produce. 3 We believe this makes a useful, independent contribution of the paper to this class of models.…”