The Employment Effects of Working Time Reductions: Sector-Level Evidence from European Reforms

Working time legislation is a key labour market regulation and the subject of heated and recurrent debates. A first-order concern is how this legislation may impact employment. In this paper, we exploit a panel of industry-level data in European countries to study the economic impact of national reductions in usual weekly working hours between 1995 and 2007. Our identification strategy relies on the five national reforms that took place over this period and on initial differences across sectors in the share of workers exposed to the reforms. We show that, on average, the number of hours worked in more affected sectors fell relative to less affected sectors but employment did not increase, while the impact on wages and value-added per hour worked appears to be positive but insignificant.