Heterogeneity and Long-Run Changes 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, namely the cross-sectional differences in households' labor supply and productivity. We conclude that the labor wedge measured from a representative household model partly reflects inaccurate household aggregation.
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Bibliographic InfoPaper provided by University of Western Ontario, CIBC Centre for Human Capital and Productivity in its series University of Western Ontario, CIBC Centre for Human Capital and Productivity Working Papers with number 20124.
Date of creation: 2012
Date of revision:
Contact details of provider:
Postal: CIBC Centre for Human Capital and Productivity, Social Science Centre, University of Western Ontario, London, Ontario, Canada N6A 5C2
Phone: 519-661-2111 Ext.85244
Web page: http://economics.uwo.ca/research/research_papers/cibc_workingpapers.html
Female and Male Labor Supply; Labor Wedge; Gender Wage Gap; Labor Income Taxation; Household Aggregation;
Find related papers by JEL classification:
- 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-2012-09-22 (All new papers)
- NEP-DEM-2012-09-22 (Demographic Economics)
- NEP-LAB-2012-09-22 (Labour Economics)
- NEP-LMA-2012-09-22 (Labor Markets - Supply, Demand, & Wages)
- NEP-MAC-2012-09-22 (Macroeconomics)
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