Economic Effects of Work Sharing in a Dynamic Labour Turnover Model

Abstract

In recent years, reduced working time has been proposed as a means of reducing unemployment through work sharing. In this way, it is thought, the state can hope to achieve equity by spreading work across a larger section of the workforce. The thinking underlying such a proposal may, however, be built upon a view of the world that fails to take into account the various general-equilibrium repercussions of reducing the length of the standard workweek. In this paper, my objective is to study the economic effects of work sharing in an incentive- (or efficiency-) wage model, more specifically, a labour-tur¬nover model introduced by Phelps [9] and Stiglitz [12], and given a complete general-equilibrium characterization by Salop [11]. The particular version of the model I will use, however, gives attention to the fact that the firm-specific training undertaken by firms is an investment decision, and hence an intertemporal analysis is conducted throughout.