Labour supply and welfare effects of the four-day work week scenarios: A microsimulation analysis for the EU

This study provides a detailed analysis of the impact of working-time reduction reforms, like the four-day work week (4DWW), on labour force participation across the EU using the DAY-EUROLAB model. The model, which is an extension of the EU-wide behavioural model EUROLAB, incorporates commuting time and leisure within a multidimensional discrete choice framework, utilising EU-SILC microdata enriched by imputed commuting time from the 2024 EWCS. The simulation results show that, while reforms reduce hours worked among the employed, they consistently raise participation, with the strongest gains in Eastern and Southern Europe and more modest effects in Northern and Western Europe. Women benefit disproportionately, particularly oldest and youngest cohorts, with increases often exceeding six to nine percentage points, compared to smaller and less consistent gains for men. Additionally, simulations results reveal a progressive pattern, with the largest improvements among lower-income quintiles while sectoral analysis highlights industry, finance, and retail as most responsive. Overall, the reforms expand labour supply and reduce gender and regional disparities, underscoring their potential as a policy tool for promoting inclusiveness in European labour markets.