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Are taxes a good predictor of time use patterns? Examining the role of some key elasticities

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  • Gómez, Manuel A.

Abstract

A home-production model is used to explain the allocation of time between leisure, work and home production. We show that differences in taxes alone explain to a great extent the time use patterns in a set of OECD countries once several key elasticities — the elasticity of substitution between market- and home-produced goods, the Frisch elasticity of labor supply, and the relative risk aversion — are set according to empirical evidence. We also show that a realistic calibration of these key elasticities results to be more important than introducing government expenditures substitutive for home-produced goods in order to bring the model's time use predictions in line with data. This is true even for Scandinavian countries, which had posed a challenge in previous studies.

Suggested Citation

  • 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.
    • Handle: RePEc:eee:ecmode:v:55:y:2016:i:c:p:394-400
    DOI: 10.1016/j.econmod.2016.03.006
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    Keywords

    Taxes; Hours worked; Leisure; Home production;

    JEL classification:

    • D1 - Microeconomics - - Household Behavior
    • J2 - Labor and Demographic Economics - - Demand and Supply of Labor

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