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Taxes, Social Subsidies, and the Allocation of Work Time

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  • L. Rachel Ngai
  • Christopher A. Pissarides

Abstract

We examine the allocation of hours of work across industrial sectors in OECD countries. We find large disparities across three sector groups, one that produces goods without home substitutes, and two others that have home substitutes but are treated differently by welfare policy. We attribute the disparities to the countries' tax and subsidy policies. High taxation substantially reduces hours in sectors that have close home substitutes but less so in other sectors. Subsidies increase hours in the subsidized sectors that have home substitutes. We compute these policy effects for 19 OECD countries. (JEL H24, H31, J22)

Suggested Citation

  • L. Rachel Ngai & Christopher A. Pissarides, 2011. "Taxes, Social Subsidies, and the Allocation of Work Time," American Economic Journal: Macroeconomics, American Economic Association, vol. 3(4), pages 1-26, October.
  • Handle: RePEc:aea:aejmac:v:3:y:2011:i:4:p:1-26
    Note: DOI: 10.1257/mac.3.4.1
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    2. Benjamin Bridgman, 2016. "Engines of Leisure," BEA Working Papers 0137, Bureau of Economic Analysis.
    3. Üngör, Murat, 2014. "Some thought experiments on the changes in labor supply in Turkey," Economic Modelling, Elsevier, vol. 39(C), pages 265-272.
    4. Alexander Bick & Nicola Fuchs-Schündeln, 2018. "Taxation and Labour Supply of Married Couples across Countries: A Macroeconomic Analysis," Review of Economic Studies, Oxford University Press, vol. 85(3), pages 1543-1576.
    5. Olivetti, Claudia & Petrongolo, Barbara, 2011. "Gender Gaps across Countries and Skills: Supply, Demand and the Industry Structure," CEPR Discussion Papers 8545, C.E.P.R. Discussion Papers.
    6. Claudia Olivetti & Barbara Petrongolo, 2014. "Gender gaps across countries and skills: Demand, supply and the industry structure," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 17(4), pages 842-859, October.
    7. Duernecker, Georg & Herrendorf, Berthold, 2018. "On the allocation of time – A quantitative analysis of the roles of taxes and productivities," European Economic Review, Elsevier, vol. 102(C), pages 169-187.
    8. Pierre Cahuc & Yann Algan, 2009. "Civic Virtue and Labor Market Institutions," American Economic Journal: Macroeconomics, American Economic Association, vol. 1(1), pages 111-145, January.
    9. Fang Lei & McDaniel Cara, 2017. "Home hours in the United States and Europe," The B.E. Journal of Macroeconomics, De Gruyter, vol. 17(1), pages 1-27, January.
    10. Lei Fang & Fang Yang, 2021. "Consumption and Hours between the United States and France," FRB Atlanta Working Paper 2021-7, Federal Reserve Bank of Atlanta.
    11. Tendai Zawaira & Manoel Bittencourt & Matthew W. Clance, 2018. "Gender Inequality and Marketisation Hypothesis in Sub-Saharan Africa," Working Papers 201876, University of Pretoria, Department of Economics.
    12. Gómez, Manuel A., 2016. "Are taxes a good predictor of time use patterns? Examining the role of some key elasticities," Economic Modelling, Elsevier, vol. 55(C), pages 394-400.
    13. Mark A. Aguiar & Erik Hurst & Loukas Karabarbounis, 2011. "Time Use During Recessions," NBER Working Papers 17259, National Bureau of Economic Research, Inc.
    14. Lei Fang & Anne Hannusch & Pedro Silos, 2020. "Bundling Time and Goods: Implications for Hours Dispersion," DETU Working Papers 2003, Department of Economics, Temple University.
    15. Fang, Lei & Zhu, Guozhong, 2017. "Time allocation and home production technology," Journal of Economic Dynamics and Control, Elsevier, vol. 78(C), pages 88-101.
    16. Ragan, Kelly S., 2013. "Quantitative evidence on the welfare effects of home sector fiscal policy," Economics Letters, Elsevier, vol. 118(2), pages 400-403.
    17. Duffy, Sarah & van Esch, Patrick & Yousef, Murooj, 2020. "Increasing parental leave uptake: A systems social marketing approach," Australasian marketing journal, Elsevier, vol. 28(2), pages 110-118.

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    More about this item

    JEL classification:

    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • 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

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