Effects of reduction in working hours on a model with job creation and job destruction

This article shows how, with certain modifications to a standard Real Business Cycle (RBC) model, and with certain qualified responses in the short and long term, a policy of reduction in the number of working hours can have positive effects on activity and employment. The modifications required to bring about these results include specification of the working day, existence of the creation and destruction of employment and differentiation between inactivity and unemployment. Results reveal that any measures taken to reduce the number of working hours must take into consideration the productivity levels of working hours, to thus ensure that the consequences of such a policy are positive not only for employment but also in all other macroeconomic variables.