Firm's demand for work hours : evidence from multi-country and matched firm-worker data

Using information on Japanese, UK, and German workers work hour and matched firms characteristics, this paper investigates whether the number of hours worked is determined by demand-side factors, and tries to introduce one possibility to explain why Japanese tend to work longer hours than workers in other countries. Based on an empirical framework that each firm sets a minimum boundary of work hours, and workers hired by the firm are not able to work less than the minimum requirement, we found that the minimum requirement depends on the fixed costs of labor that the firm bears. Specifically, firms that tend to conduct labor hoarding during recessions, presumably because of higher fixed costs, require incumbent workers to work longer hours. We also found that the greater the workers firm-specific skills, the more firms placed demands on these workers to work longer hours, given other things are equal. Since Japanese firms have long been considered to bear large fixed costs to train workers, we interpret the long work hour requirement as a rational strategy for Japanese firms to protect those workers that have accumulated high skills from dismissal. In other words, the long work hours of Japanese workers reflect the practice of long-term employment, a typical feature of the Japanese labor market.