09.09.2026

Recent firm-level experiments with shorter workweeks reflect the growing belief that reduced hours may partly offset output losses via productivity gains. In their paper, "Optimal redistribution with labor supply dependent productivity", Gürer and Weichenrieder study how such productivity effects should affect redistribution. Relative to a benchmark model with fixed productivities, they find that labor-supply dependent productivity leads to higher marginal tax rates, especially for higher-income individuals, and greater redistribution. The key mechanism is that marginal taxation becomes a more effective screening instrument with such productivity effects. https://link.springer.com/article/10.1007/s10797-026-09981-5