This paper analyzes the consequences of a working time reduction within an integrated shirking-matching model. Under "laissez faire", workers and employers bargain over wages and working hours. When unemployment is high, the no-shirking condition is binding and the number of working hours is lower than the level that would be negotiated in the absence of unobservable shirking. In this case, a work-sharing policy increases aggregate employment. At the opposite, for low unemployment countries,...[Show more]
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