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IMF and MIT, respectively. We thank Joshua Angrist, David Autor and Olivier Blanchard for insightful discussions and comments. Dora Costa, Luc Everaert, Giuseppe Moscarini, Andrei Shleifer, and seminar participants at MIT, the IMF, the Yale School of Management Behavioral Science Conference, the Bank of England, the 2006 EALE Conference, and the 9th IZA European Summer School in Labor Economics provided valuable suggestions. Filipa Sá acknowledges financial support from the Portuguese Science and Technology Foundation through a Ph.D. fellowship.
It is important to note, though, that a complete evaluation of the 35-hour workweek laws would include their longer-term effects, which would require a longer data series.
The labor supply side of the model is an application of the general framework developed by Cooper and John (1988).
Clearly, there may also be negative complementarities in leisure. For instance, beaches get crowded during summer vacations and some people would choose to stay longer at home only if their neighbors don’t.
Freeman (1998) gives an interesting discussion of the demand-side and supply-side responses to restrictions in hours.
Another possible response if workers are constrained by the 35-hours mandate is to become self-employed. We looked at the effect of the law on transitions from employment to self-employment and found no effect. This is not surprising, given that the decision to be self-employed involves many considerations other than the workweek size.
Kugler and Pica (2005) adopt a similar identification strategy to identify the employment effect of the increase in unjust dismissal costs for firms below 15 employees in Italy in 1990. The variation by firm size is also used in Acemoglu and Angrist (2001) to examine the employment consequences of the American with Disabilities Act.
Marital status is an indicator equal to 1 if the individual has a partner who lives in the same household, even if he is not legally married, and 0 otherwise.
Our results are not sensitive to the choice of the cutoff on firm size.
We exclude workers with earnings above 80% of the minimum wage because we want to ensure more homogeneity across individuals in the two categories. Moreover, the law gave more flexibility in the negotiation of hours and earnings to workers in managerial positions, and these workers are more likely to be at the top of the earnings distribution.
The results are insensitive to estimation with individual fixed effects to account for unobservable heterogeneity.
In this and the following sections the results do not change significantly if we use either a probit or a logit specification instead of the linear probability model described in (8).
Satisfaction with hours of work is measured on a scale from 1 to 7. The question from the Eurobarometer is: “I am going to read out a list of various aspects of jobs. Please choose between the two ends of this scale. If you are completely dissatisfied with that particular aspect of your present job, you give a score of 1. If you are completely satisfied with that particular aspect of your present job, you give a score of 7. The scores between 1 and 7 allow you to say how close to either side you are.” There is some skepticism about the quality of subjective measures of happiness and satisfaction. But, in most cases, friends and colleagues of the individual give ratings that are strongly related to the way people rate themselves, as reported in Diener and Suh (1999), and they provide some additional information on individuals’ welfare.