Self-managed working time and employee effort: Microeconometric evidence

Based on German individual-level panel data, this paper empirically examines the impact of self-managed working time (SMWT) on employee effort. Theoretically, workers may respond positively or negatively to having control over their own working hours, depending on whether SMWT increases work morale, induces reciprocal work intensification, or encourages employee shirking. Using German individual-level panel data we show that SMWT employees exert higher effort levels than employees with fixed working hours. However, large parts of this extra effort are not due to the policy itself, but can be explained by different observed and unobserved characteristics of workers selecting into jobs with SMWT. After controlling for endogeneity, there remains a moderate positive effect which is mainly driven by employees with high work ethic, suggesting that intrinsic rather than extrinsic motivation is an important moderator of the SMWT effect. We exclude reciprocal work intensification as an important channel of providing extra effort. Finally, we find no SMWT effect among women with children to be parented indicating that these workers primarily choose SMWT to accommodate family obligations.