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Home production, labor taxation and trade account

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  • Luigi Bonatti

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    Abstract

    The two-country growth model developed in this paper incorporates home production and distinguishes between a market sector producing services that can also be home-produced and a market sector producing goods without home-produced substitutes. This distinction coincides in the model with the distinction between the sector producing internationally tradable goods and the sector producing nontradables. Hence, differentials in labor tax rates across countries, which determine differences in the allocation of households’ time between market activities and home activities, influence also the mix of tradable and nontradable goods that characterizes the market output of each country, thus affecting their bilateral trade balance.

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    Bibliographic Info

    Paper provided by Department of Economics, University of Trento, Italia in its series Department of Economics Working Papers with number 0715.

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    Date of creation: 2007
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    Handle: RePEc:trn:utwpde:0715

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    Keywords: Market time; employment rate; nontradable goods; two-country model; endogenous growth.;

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    1. 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.
    2. Olovsson, Conny, 2004. "Why do Europeans Work so Little?," Seminar Papers 727, Stockholm University, Institute for International Economic Studies.
    3. D'Agostino, Antonello & Serafini, Roberta & Ward, Melanie, 2006. "Sectoral explanations of employment in Europe: the role of services," Research Technical Papers 8/RT/06, Central Bank of Ireland.
    4. Stephen L. Parente & Richard Rogerson & Randall Wright, 2000. "Homework in Development Economics: Household Production and the Wealth of Nations," Journal of Political Economy, University of Chicago Press, vol. 108(4), pages 680-687, August.
    5. Davis, Steven J. & Henrekson, Magnus, 2004. "Tax Effects on Work Activity, Industry Mix and Shadow Economy Size: Evidence from Rich-Country Comparisons," Ratio Working Papers 57, The Ratio Institute.
    6. Edward C. Prescott, 2004. "Why do Americans Work so Much More than Europeans?," NBER Working Papers 10316, National Bureau of Economic Research, Inc.
    7. Alberto Alesina & Edward L. Glaeser & Bruce Sacerdote, 2005. "Work and Leisure in the U.S. and Europe: Why So Different?," NBER Working Papers 11278, National Bureau of Economic Research, Inc.
    8. Richard B. Freeman & Ronald Schettkat, 2005. "Marketization of household production and the EU-US gap in work," Economic Policy, CEPR & CES & MSH, vol. 20(41), pages 6-50, 01.
    9. Catherine L. Mann, 2004. "The US Current Account, New Economy Services, and Implications for Sustainability," Review of International Economics, Wiley Blackwell, vol. 12(2), pages 262-276, 05.
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