Flexible Work Hours and Productivity: Some Evidence from the Pharmaceutical Industry

Flexible work hours potentially influence productivity through effects on absenteeism and turnover, organizational attachment, job attitudes, work‐related stress, and other areas. Prior studies suggest positive effects on productivity but are inconclusive because of small sample sizes, failure to apply direct productivity measures, or failure to account for other associated changes. We apply alternative fixed‐ and random‐effects models to estimate production functions using panel data, with controls included for firm effects, time effects, capital quality, autocorrelation, and specification error. The results suggest that flexible work schedules contribute to improvements of about 10 percent in productivity.