Seminar Papers, Institute for International Economic Studies, Stockholm University
Why do Europeans Work so Little?
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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