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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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    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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