Do Reductions Of Standard Hours Affect Employment Transitions?: Evidence From Chile

This paper exploits the reduction of weekly working hours from 48 to 45 occurred in Chile in January 2005. The authors use this pure and exogenous policy change to identify the employment effects of such a policy. The main contribution is that they overcome the problems of previous studies such as: selection between hours and employment, lack of identification strategy due to the joint implementation of policies and lack of crucial variables (like hourly wages and usual hours). The results suggest no significant effects of a reduction of standard hours on employment transitions and a significant effect on hourly wages (i.e. wage compensation). These results are robust to several specifications.