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Indivisible Labor and Its Supply Elasticity: Do Taxes Explain European Employment?

Author

Listed:
  • Lars Ljungqvist

    (DEPT OF ECONOMICS STOCKHOLM SCHOOL OF ECONOMICS)

  • Thomas J. Sargent

Abstract

We first scrutinize and challenge Prescott's (2002, 2004) quantitative analysis of the role of differences in taxes in explaining cross-country differences in labor market outcomes, and then defend an alternative model that assigns an important role to cross-country differences in social unemployment insurance institutions that Prescott argues can be safely ignored. In the process, we explore how the assumption of indivisible labor interacts with assumptions regarding the (in)completeness of financial markets and any frictions in the labor market, to determine the labor supply elasticity.

Suggested Citation

  • Lars Ljungqvist & Thomas J. Sargent, 2006. "Indivisible Labor and Its Supply Elasticity: Do Taxes Explain European Employment?," 2006 Meeting Papers 734, Society for Economic Dynamics.
    • Handle: RePEc:red:sed006:734
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    References listed on IDEAS

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    Cited by:

    1. Paul Gomme & Damba Lkhagvasuren, 2011. "The Cyclicality of Search Intensity in a Competitive Search Model," Working Papers 11003, Concordia University, Department of Economics.
    2. Gomme, Paul & Lkhagvasuren, Damba, 2015. "Worker search effort as an amplification mechanism," Journal of Monetary Economics, Elsevier, vol. 75(C), pages 106-122.

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    More about this item

    Keywords

    Employment lotteries; indivisible labor; labor supply elasticity; taxation; unemployment; unemployment insurance;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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