Knowledge that Transforms

We investigate the effects of the February 1, 1982, mandatory reduction of weekly working hours in France. Just after François Mitterrand’s election in 1981, the minimum wage was increased by 5 percent. The workweek was then reduced from 40 to 39 hours. At the same time, stable monthly earnings for minimum‐wage earners were mandated. We show that workers employed 40 hours and above in March 1981 were more likely to lose their jobs between 1981 and 1982 than workers employed 36–39 hours in March 1981. Moreover, many workers were still working 40 hours after February. These workers were also strongly affected by this reduction. Our estimates of the impact of this one‐hour reduction on employment losses vary between 2 percent and 4 percent. Minimum‐wage workers were most affected by the changes.

This paper is a statistical analysis of the manner in which the Federal Reserve determines the level of the federal funds rate target, one of the most publicized and anticipated economic indicators in the financial world. The paper introduces new statistical tools for forecasting a discrete‐valued time series such as the target and suggests that these methods, in conjunction with a focus on the institutional details of how the target is determined, can significantly improve on standard vector autoregression forecasts of the effective federal funds rate. We further show that the news that the Fed has changed the target has statistical content substantially different from the news that the Fed failed to make an anticipated target change, causing us to challenge some of the conclusions drawn from standard linear VAR impulse‐response functions.