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Institute for International Economic Studies, Stockholm University Seminar Papers, Institute for International Economic Studies, Stockholm University

No 727:
Why do Europeans Work so Little?

Conny Olovsson ()

Abstract: Market work per person is roughly 10 percent higher in the U.S. than in Sweden. However, if we include the work carried out in home production, the total amount of work only differs by 1 percent. I set up a model with home production, and show that differences in policy - mainly taxes – can account for the discrepancy in labor supply between Sweden and the U.S. Moreover, even though the elasticity of labor supply is rather low for individual households, labor taxes are estimated to be associated with considerable output losses. I also show that policy can account for the falling trend in market work in Sweden since 1960. The largest reduction occurs from 1960 until around 1980, both in the model and the data. After the early 1980s, the trends for both taxes and actual hours worked are basically flat. This is also true for hours worked in the model.

Keywords: Labor supply; Taxes; Home production; (follow links to similar papers)

JEL-Codes: D13; H24; J22; (follow links to similar papers)

27 pages, February 9, 2004

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