Labour markets: Time and income effects from reducing working hours in Germany

Abstract

A reduction in working hours is being considered to tackle issues associated with ecological sustainability, social equity and enhanced life satisfaction-a so-called triple dividend. With respect to an environmental dividend, we analyse the time-use rebound effects of reducing working time. We explore how an increase in leisure time triggers a rearrangement of time and expenditure budgets, and thus the use of resources in private households. Does it hold true that time-intensive activities replace resource-intensive consumption when people have more free time at their disposal? In order to give an answer to the question, we estimate the marginal propensity to consume and the marginal propensity to time use in Germany. The findings from national surveys on time use and expenditure show composition effects of gains in leisure time and income loss. The results show that time savings due to a reduction in working time trigger relevant rebound effects in terms of resource use. However, the authors put the rebound effects following a reduction in working time into perspective. Time-use rebound effects lead to increased voluntary social engagement and greater life satisfaction, the second and third dividends.