This paper deals with the employment effects of reduced working time when firms' endogenous response of overtime is considered. The anal ysis distinguishes between fixed and profit-maximizing levels of outp ut as well as between interior and corner solutions. It is shown that under plausible assumptions, a reduction in working time is quite li kely to be counterproductive as an employment-promoting measure.
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Calmfors et al. (1988) studied this question.
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