Uniform Working Hours: A Culprit of Structural Unemployment

In this paper, we construct a simple model based on heterogeneity in workers' productivity and homogeneity in their working schedules. This simple model can generate unemployment, even if wages adjust instantaneously, firms are perfectly competitive and can perfectly observe workers' productivity and effort. Unemployment in our model falls upon low-skilled workers, because firms do not find it optimal to hire low-skilled workers when working time across heterogeneous workers must be synchronized, and low-skilled workers on the other hand do not find it attractive working for hours the same length as of high-skilled workers at competitive wages. Our model can also explain the stylized fact that both the number of employees and the number of hours comove with the business cycle.