Jan Sebastian Nimczik, ESMT Berlin
The Right to Reduce Working Time: How Germany’s Part-time Reform affected Labor Supply, Demand, Wages, and Productivity
with Gabriele Lucchetti
We study the effect of granting workers the right to reduce working hours on productivity, wages, and sorting. Using detailed German administrative data and surveys, we exploit a difference-in-differences design around the establishment-size eligibility threshold introduced by the Part-Time and Fixed-Term Employment Act from 2001. The reform raised part-time employment shares and the head count at eligible establishments. The effect is driven entirely by female-dominated establishments, where the part-time share rises by 3.5 percentage points; male-dominated establishments show no response. Female-dominated establishments also see higher wage bills and revenues, alongside a positive but insignificant increase in value added per worker, suggesting unit labor costs are not fully offset by productivity gains. While the reform increased flexibility, it also fostered gender polarization, as women sorted into already female-dominated establishments.