Claudio Labanca (San Diego)
30 January 2017 @ 12:00
“Coordination of Hours within the Firm”
Teamwork has become increasingly important in many firms, yet little is known about how coordination of hours among heterogeneous coworkers affects pay, productivity and labor supply. In this paper we propose a framework where differently productive firms choose whether or not to coordinate hours in exchange for productivity gains. In this framework, we show that more productive firms select into coordinating hours and pay compensating wage differentials, leading to attenuated labor supply responses and spillovers from tax changes. Next, we bring the model predictions to the data using linked employer-employee registers in Denmark. We first document evidence of positive correlations between wages, productivity and the degree of hours coordination – measured as the dispersion of hours – within firms. We estimate that hours coordination can explain around 4% of the variance of firm-level wages. We then estimate labor supply elasticities using changes to the personal income tax schedule in 2010 which affected high-wage earners differently. We find evidence of higher labor supply elasticity in firms with lower hours coordination. Furthermore, we find evidence of spillover effects on hours worked by coworkers not directly affected by the reform that are consistent with our model of firm level coordination of hours.