Bing Geng
ABSTRACT
This research uses China Health and Nutrition Survey to investigate the effects of the mandatory work hour reduction policy on labor market outcomes. Between 1994 and 1995, the Chinese government implemented a workweek reduction policy that requires institutions, organizations, and enterprises to reduce weekly work hours from 48 to 40 hours per week. Since the policy does not heavily influence self-employed workers, the study explores a difference-in-difference method to compare self-employed and not self-employed workers and obtain the policy's causal effects. This study further features the event study method to show that the policy takes time to reach its full effects. This research presents that the weekly work time has been successfully reduced by around seven hours per week. Moreover, compared to the control group, the employment of the treatment group drops about seven to eight percentage points after the policy, which can be potentially explained by the fact that employers need to dismiss workers when they can work less to cut down costs. Widespread wisdom thought that a workweek reduction policy could ease unemployment, because with each worker working less, more people may get to work. Our results suggest that the policy has played the opposite role.
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