Trends in U.S. hours and the labor wedge
AbstractFrom 1980 until 2007, U.S. average hours worked increased by thirteen percent, due to a large increase in female hours. At the same time, the U.S. labor wedge, measured as the discrepancy between a representative household's marginal rate of substitution between consumption and leisure and the marginal product of labor, declined substantially. We examine these trends in a model with heterogeneous households: married couples, single males and single females. Our quantitative analysis shows that the shrinking gender wage gaps and increasing labor income taxes observed in U.S. data are key determinants of hours and the labor wedge. Changes in our model's labor wedge are driven by distortionary taxes and non-distortionary factors, such as cross-sectional differences in households' labor supply and productivity. We conclude that the labor wedge measured from a representative household model partly reflects imperfect household aggregation.
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Bibliographic InfoPaper provided by Federal Reserve Bank of Dallas in its series Globalization and Monetary Policy Institute Working Paper with number 53.
Date of creation: 2010
Date of revision:
Other versions of this item:
- E24 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution
- H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
- H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
- J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-07-24 (All new papers)
- NEP-DGE-2010-07-24 (Dynamic General Equilibrium)
- NEP-LAB-2010-07-24 (Labour Economics)
You can help add them by filling out this form.
Blog mentionsAs found by EconAcademics.org, the blog aggregator for Economics research:CitEc Project, subscribe to its RSS feed for this item.
- Murat Tasci & Andrea Pescatori, 2011. "Search Frictions and the Labor Wedge," IMF Working Papers 11/117, International Monetary Fund.
- Andrea Pescatori & Murat Tasci, 2011. "Search Frictions and the Labor Wedge," KoÃ§ University-TUSIAD Economic Research Forum Working Papers 1113, Koc University-TUSIAD Economic Research Forum.
- Finn E. Kydland & Carlos E. J. M. Zarazaga, 2013. "Fiscal sentiment and the weak recovery from the Great Recession: a quantitative exploration," Working Papers 1301, Federal Reserve Bank of Dallas.
- Murat Tasci & Andrea Pescatori, 2011. "Search Frictions and the Labor Wedge," 2011 Meeting Papers 371, Society for Economic Dynamics.
- Andrea Pescatori & Murat Tasci, 2011. "Search frictions and the labor wedge," Working Paper 1111, Federal Reserve Bank of Cleveland.
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