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Understanding Growth and Inequality Trends: The Role of Labour Supply in the US and Germany

Between 1980 and 2000, average actual working hours per adult rose by 234 in the United States while falling by 170 in Germany. These trends imply that growth in per capita GDP may be a poor indicator of trends in average economic well-being and that trends in money income inequality may misrepresent trends in the inequality of economic well-being. Is greater inequality in the US the incentive that motivates greater work effort by Americans? Differentials in average usual working hours largely arise from differences in workforce participation -- particularly among women and older men. Except for the extreme lower tail, the distribution of usual working hours of prime age males is essentially identical and constant in Germany and the US -- which implies that the grea ter inequality of earnings in the US has no noticeable incentive effect on the labour supply of workers.

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Article provided by University of Toronto Press in its journal Canadian Public Policy.

Volume (Year): 29 (2003)
Issue (Month): s1 (January)
Pages: 163-184

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Handle: RePEc:cpp:issued:v:29:y:2003:i:s1:p:163-184
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  1. Bell, Linda A. & Freeman, Richard B., 2001. "The incentive for working hard: explaining hours worked differences in the US and Germany," Labour Economics, Elsevier, vol. 8(2), pages 181-202, May.
  2. Heckman, James J, 1993. "What Has Been Learned about Labor Supply in the Past Twenty Years?," American Economic Review, American Economic Association, vol. 83(2), pages 116-21, May.
  3. Osberg, Lars & Phipps, Shelley, 1993. "Labour Supply with Quantity Constraints: Estimates from a Large Sample of Canadian Workers," Oxford Economic Papers, Oxford University Press, vol. 45(2), pages 269-91, April.
  4. Ed Diener & Eunkook Suh, 1997. "Measuring Quality Of Life: Economic, Social, And Subjective Indicators," Social Indicators Research, Springer, vol. 40(1), pages 189-216, January.
  5. Linda Bell & Richard Freeman, 1994. "Why Do Americans and Germans Work Different Hours?," NBER Working Papers 4808, National Bureau of Economic Research, Inc.
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