Do Labor Markets Provide Enough Short‐hour Jobs? An Analysis of Work Hours and Work Incentives

This paper examines the role that work incentives play in the determination of work hours. We use a conventional efficiency wage model to analyze how firms respond to worker preferences regarding wage‐hours packages. In contrast to previous work, we study markets in which workers have heterogeneous preferences. In this context we demonstrate that job offers will specify both wages and work hours and many individuals will not be able to work their preferred number of hours. We show that the labor market equilibrium may be characterized by a less than optimal number of short‐hour jobs.