Effects on unemployment of reduced working time in an economy where firms set wages

The paper considers an economy where firms set wages, balancing the direct benefit of low wages with the indirect cost of low wages (relative to other firms) leading to high quit rates and therefore high training costs. Reducing the institutionally given working time makes the importance of training costs increase, thus making firms more concerned about keeping quit rates low. The effect is increased unemployment as a consequence of reduced working time. The effect on hourly and yearly wages is uncertain, although increased hourly wages seem to be the most plausible case.