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Taxes, Social Subsidies, and the Allocation of Work Time

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  • L. Rachel Ngai
  • Christopher A. Pissarides

Abstract

We examine the allocation of hours of work across industrial sectors in OECD countries. We find large disparities across three sector groups, one that produces goods without home substitutes, and two others that have home substitutes but are treated differently by welfare policy. We attribute the disparities to the countries' tax and subsidy policies. High taxation substantially reduces hours in sectors that have close home substitutes but less so in other sectors. Subsidies increase hours in the subsidized sectors that have home substitutes. We compute these policy effects for 19 OECD countries. (JEL H24, H31, J22)

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Bibliographic Info

Article provided by American Economic Association in its journal American Economic Journal: Macroeconomics.

Volume (Year): 3 (2011)
Issue (Month): 4 (October)
Pages: 1-26

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Handle: RePEc:aea:aejmac:v:3:y:2011:i:4:p:1-26

Note: DOI: 10.1257/mac.3.4.1
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  1. Esping-Andersen, Gosta, 1999. "Social Foundations of Postindustrial Economies," OUP Catalogue, Oxford University Press, number 9780198742005.
  2. L. Rachel Ngai & Christopher Pissarides, 2006. "Trends in hours and economic growth," LSE Research Online Documents on Economics 4462, London School of Economics and Political Science, LSE Library.
  3. Lindbeck, Assar, 1982. "Tax Effects versus Budget Effects on Labor Supply," Economic Inquiry, Western Economic Association International, vol. 20(4), pages 473-89, October.
  4. Falvey, Rodney E & Gemmell, Norman, 1996. "Are Services Income-Elastic? Some New Evidence," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 42(3), pages 257-69, September.
  5. Conny Olovsson, 2004. "Why do Europeans Work so Little?," 2004 Meeting Papers 760, Society for Economic Dynamics.
  6. Ohanian, Lee & Raffo, Andrea & Rogerson, Richard, 2008. "Long-term changes in labor supply and taxes: Evidence from OECD countries, 1956-2004," Journal of Monetary Economics, Elsevier, vol. 55(8), pages 1353-1362, November.
  7. Yongsung Chang & Frank Schorfheide, 2002. "Labor-Supply Shifts and Economic Fluctuations," Macroeconomics 0204005, EconWPA.
  8. Pierre Cahuc & Yann Algan, 2009. "Civic Virtue and Labor Market Institutions," American Economic Journal: Macroeconomics, American Economic Association, vol. 1(1), pages 111-45, January.
  9. Berthold Herrendorf & Richard Rogerson & Ákos Valentinyi, 2009. "Two Perspectives on Preferences and Structural Transformation," NBER Working Papers 15416, National Bureau of Economic Research, Inc.
  10. Blundell, Richard & Pashardes, Panos & Weber, Guglielmo, 1993. "What Do We Learn About Consumer Demand Patterns from Micro Data?," American Economic Review, American Economic Association, vol. 83(3), pages 570-97, June.
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Cited by:
  1. Claudia Olivetti & Barbara Petrongolo, 2011. "Gender Gaps Across Countries and Skills: Supply, Demand and the Industry Structure," CEP Discussion Papers dp1093, Centre for Economic Performance, LSE.
  2. Mark A. Aguiar & Erik Hurst & Loukas Karabarbounis, 2011. "Time Use During Recessions," NBER Working Papers 17259, National Bureau of Economic Research, Inc.
  3. Ragan, Kelly S., 2013. "Quantitative evidence on the welfare effects of home sector fiscal policy," Economics Letters, Elsevier, vol. 118(2), pages 400-403.

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