With this article, the authors are the first to analyze and explain the relationship between part-time employment and firm productivity. Using a unique data set on the Dutch pharmacy sector that includes the working hours of all employees and a “hard” physical measure of firm productivity, the authors estimate a production function including heterogeneous employment shares based on working hours. The authors find that firms with a large part-time employment share are more productive than firms with a large share of full-time workers: a 10% increase in the part-time share is associated with 4.8% higher productivity. Additional data on the timing of labor demand show that this can be explained by a different allocation of part-timers compared with full-timers. This enables firms with large part-time employment shares to allocate their labor force more efficiently across working days.
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