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Taxes, Social Subsidies and the Allocation of Work Time

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  • Ngai, Liwa Rachel
  • Pissarides, Christopher

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 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 nineteen OECD countries.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 8328.

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Date of creation: Apr 2011
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Handle: RePEc:cpr:ceprdp:8328

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Keywords: allocation of time; home production; multisector model; social subsidies; tax wedge;

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References

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  1. Ngai, L. Rachel & Pissarides, Christopher A., 2007. "Trends in Hours and Economic Growth," IZA Discussion Papers 2540, Institute for the Study of Labor (IZA).
  2. Esping-Andersen, Gosta, 1999. "Social Foundations of Postindustrial Economies," OUP Catalogue, Oxford University Press, number 9780198742005, October.
  3. Berthold Herrendorf & Richard Rogerson & Ákos Valentinyi, 2009. "Two Perspectives on Preferences and Structural Transformation," NBER Working Papers 15416, National Bureau of Economic Research, Inc.
  4. Yongsung Chang & Frank Schorfheide, 2002. "Labor-Supply Shifts and Economic Fluctuations," Macroeconomics 0204005, EconWPA.
  5. Olovsson, Conny, 2004. "Why do Europeans Work so Little?," Seminar Papers 727, Stockholm University, Institute for International Economic Studies.
  6. Davis, Steven J. & Henrekson, Magnus, 2004. "Tax Effects on Work Activity, Industry Mix and Shadow Economy Size: Evidence from Rich-Country Comparisons," Working Paper Series in Economics and Finance 560, Stockholm School of Economics.
  7. Lindbeck, Assar, 1982. "Tax Effects versus Budget Effects on Labor Supply," Economic Inquiry, Western Economic Association International, vol. 20(4), pages 473-89, October.
  8. Lee Ohanian & Andrea Raffo & Richard Rogerson, 2006. "Long-term changes in labor supply and taxes: evidence from OECD countries, 1956-2004," Research Working Paper RWP 06-16, Federal Reserve Bank of Kansas City.
  9. 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.
  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.
  11. 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.
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Cited by:
  1. Claudia Olivetti & Barbara Petrongolo, . "Gender gaps across countries and skills: Demand, supply and the industry structure," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics.
  2. Claudia Olivetti & Barbara Petrongolo, 2011. "Gender Gaps across Countries and Skills: Supply, Demand and the Industry Structure," Boston University - Department of Economics - Working Papers Series WP2011-043, Boston University - Department of Economics.
  3. Mark A. Aguiar & Erik Hurst & Loukas Karabarbounis, 2011. "Time Use During Recessions," NBER Working Papers 17259, National Bureau of Economic Research, Inc.
  4. 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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