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Market Work, Home Work, and Taxes: A Cross-Country Analysis

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  • Richard Rogerson

Abstract

This paper uses a simple model of labor supply extended to allow for home production to understand the extent to which differences in taxes can account for differences in time allocations between the US and Europe. Once home production is included, the elasticity of substitution between consumption and leisure is almost irrelevant in determining the response of market hours to higher taxes. But to account for observed differences in leisure and time spent in home production, one still requires a relatively large elasticity of substitution between consumption and leisure, combined with a relatively small elasticity of substitution between time and goods in home production. Copyright � 2009 The Author. Journal compilation � 2009 Blackwell Publishing Ltd.

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Bibliographic Info

Article provided by Wiley Blackwell in its journal Review of International Economics.

Volume (Year): 17 (2009)
Issue (Month): 3 (08)
Pages: 588-601

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Handle: RePEc:bla:reviec:v:17:y:2009:i:3:p:588-601

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References

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  1. Freeman, Richard B & Schettkat, Ronald, 2001. " Marketization of Production and the US-Europe Employment Gap," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 63(0), pages 647-70, Special I.
  2. Yongsung Chang & Frank Schorfheide, 2002. "Labor-Supply Shifts and Economic Fluctuations," Macroeconomics 0204005, EconWPA.
  3. Richard Rogerson, 2007. "Structural Transformation and the Deterioration of European Labor Market Outcomes," NBER Working Papers 12889, National Bureau of Economic Research, Inc.
  4. Greenwood, J. & Hercowitz, Z., 1991. "The Allocation of Capital and Time Over the Business Cycles," UWO Department of Economics Working Papers 9104, University of Western Ontario, Department of Economics.
  5. Burda, Michael C. & Hamermesh, Daniel S. & Weil, Philippe, 2006. "The Distribution of Total Work in the EU and US," IZA Discussion Papers 2270, Institute for the Study of Labor (IZA).
  6. Steven J. Davis & Magnus Henrekson, 2004. "Tax Effects on Work Activity, Industry Mix and Shadow Economy Size: Evidence from Rich-Country Comparisons," NBER Working Papers 10509, National Bureau of Economic Research, Inc.
  7. Gronau, Reuben, 1977. "Leisure, Home Production, and Work-The Theory of the Allocation of Time Revisited," Journal of Political Economy, University of Chicago Press, vol. 85(6), pages 1099-1123, December.
  8. McGrattan, Ellen R & Rogerson, Richard & Wright, Randall, 1997. "An Equilibrium Model of the Business Cycle with Household Production and Fiscal Policy," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 38(2), pages 267-90, May.
  9. Mark Aguiar & Erik Hurst, 2007. "Life-Cycle Prices and Production," American Economic Review, American Economic Association, vol. 97(5), pages 1533-1559, December.
  10. 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.
  11. Enrique G. Mendoza & Assaf Razin & Linda L. Tesar, 1994. "Effective Tax Rates in Macroeconomics: Cross-Country Estimates of Tax Rates on Factor Incomes and Consumption," NBER Working Papers 4864, National Bureau of Economic Research, Inc.
  12. Peter Rupert & Richard Rogerson & Randall Wright, 1994. "Estimating substitution elasticities in household production models," Staff Report 186, Federal Reserve Bank of Minneapolis.
  13. Susumu Imai & Michael P. Keane, 2004. "Intertemporal Labor Supply and Human Capital Accumulation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 45(2), pages 601-641, 05.
  14. Richard Rogerson & Johanna Wallenius, 2007. "Micro and Macro Elasticities in a Life Cycle Model With Taxes," NBER Working Papers 13017, National Bureau of Economic Research, Inc.
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Cited by:
  1. Shirai, Daichi & Nagamachi, Kohei & Eguchi, Naotaka, 2012. "The Impacts of Firms' Technology Choice on the Gender Differences in Wage and Time Allocation: A Cross-Country Analysis," MPRA Paper 56666, University Library of Munich, Germany, revised 13 Jun 2014.
  2. Hans Fehr & Manuel Kallweit & Fabian Kindermann, 2013. "Reforming Family Taxation in Germany: Labor Supply vs. Insurance Effects," SOEPpapers on Multidisciplinary Panel Data Research 613, DIW Berlin, The German Socio-Economic Panel (SOEP).
  3. S. Boragan Aruoba & Morris A. Davis & Randall Wright, 2012. "Homework in Monetary Economics: Inflation, Home Production, and the Production of Homes," NBER Working Papers 18276, National Bureau of Economic Research, Inc.
  4. Karabarbounis, Loukas, 2010. "Labor wedges and open economy puzzles," MPRA Paper 31370, University Library of Munich, Germany.
  5. Epstein, Brendan & Kimball, Miles S., 2014. "The Decline of Drudgery and the Paradox of Hard Work," International Finance Discussion Papers 1106, Board of Governors of the Federal Reserve System (U.S.).
  6. Jan Kabatek & Arthur Van Soest & Elena Stancanelli, 2014. "Income taxation, labour supply and housework: a discrete choice model for French couples," PSE - Labex "OSE-Ouvrir la Science Economique" hal-00966801, HAL.
  7. repec:hal:cesptp:hal-00966801 is not listed on IDEAS

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