Long Working Hours Make Us Less Productive but Also Less Costly

Abstract

This paper develops and assesses empirically a simple model of firms’ optimal decision regarding working hours, where productivity varies with hours and where the firm faces quasi-fixed labour costs. Using Belgian firm-level data on production, labour costs, workers, and hours, and focusing on the estimation of elasticities along the isoquant and the isocost, we find evidence of not only declining productivity of hours but also of quasi-fixed labour costs in the range of 20 per cent of total labour costs. The tentative conclusion is that firms facing such costs are enticed to raise working hours, even if this results in lower productivity.