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 differs by only 1%. 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, 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. After that trends for both taxes and hours worked are basically flat. This is also what the model predicts for hours worked
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Paper provided by Society for Economic Dynamics in its series 2004 Meeting Papers with number
760.
Length: Date of creation: 2004 Date of revision: Handle: RePEc:red:sed004:760
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Find related papers by JEL classification: D13 - Microeconomics - - Household Behavior - - - Household Production and Intrahouse Allocation H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
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