• Journal of Labour Economics
• /
• v.25 no.2
• /
• pp.33-78
• /
• 2002

This study analyzes effects of the proposed reduction of legal working hours in Korea in which base wage is unchanged with working hours reduction. The theoretical analysis shows that a reduction of legal working hours would result in less than equal size reduction of actual working hours, and increase in wages. On the other hand, the effects on employment is ambiguous depending on the substitution effect and scale effect. An empirical analysis based on macro-economic model simulation supports the theoretical conjecture. It has been found that with the reduction of legal working hours, real wages and consumption increase while actual working hours decreases about half of the legal hours reduction. In addition, the immediate and outright imposition of legal hours reduction on all sectors of the economy is found to create a cost push inflation and reduce GDP, investment, and employment. This negative effects are lessened as the reduction of legal hours is gradually made and/or some measures to absorb the cost shock such as abolition of paid monthly leave are employed together.

• Journal of Labour Economics
• /
• v.37 no.1
• /
• pp.1-28
• /
• 2014

We use a set of Korea panel data to estimate effects of legal working hours reduction on actual hours worked and employment effects, through panel econometrics methods. Taking account of sequential decrease in legal hours worked since 2004, we estimate the relationship between legal and actual working hours by size of industries. It is found that one hour reduction of legal hours per week caused 0.44 to 1.05 actual hours worked on average per week, depending on different industrial sizes. Also, estimated employment effects were not unanimously determined, rather they turn out to be clearly size-dependent, which provide different results from exiting literature. Our analysis proposed in this work can be restrictive as, for instance, there is significant lack of data for foreign workers, particularly in the small-sized industries. Subsequent empirical analysis is expected.