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Why do Americans work so much more than Europeans?

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  • Edward C. Prescott

Abstract

Americans now work 50 percent more than do the Germans, French, and Italians. This was not the case in the early 1970s, when the Western Europeans worked more than Americans. This article examines the role of taxes in accounting for the differences in labor supply across time and across countries; in particular, the effective marginal tax rate on labor income. The population of countries considered is the G-7 countries, which are major advanced industrial countries. The surprising finding is that this marginal tax rate accounts for the predominance of differences at points in time and the large change in relative labor supply over time.

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Article provided by Federal Reserve Bank of Minneapolis in its journal Quarterly Review.

Volume (Year): (2004)
Issue (Month): Jul ()
Pages: 2-13

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Handle: RePEc:fip:fedmqr:y:2004:i:jul:p:2-13:n:v.28no.1
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Keywords: Workweek;

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Find related papers by JEL classification:
  • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
  • H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents

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  1. Finn E. Kydland & Carlos E. J. M. Zarazaga, 2002. "Online Appendix to Argentina's Lost Decade and the Subsequent Recovery Puzzle," Technical Appendices kydland02, Review of Economic Dynamics.
  2. Baxter, Marianne & King, Robert G, 1993. "Fiscal Policy in General Equilibrium," American Economic Review, American Economic Association, vol. 83(3), pages 315-34, June.
  3. Ellen R. McGrattan & Edward C. Prescott, 2001. "Is the Stock Market Overvalued?," NBER Working Papers 8077, National Bureau of Economic Research, Inc.
  4. Stephen Nickell, 2003. "Employment and Taxes," CESifo Working Paper Series 1109, CESifo Group Munich.
  5. Conny Olovsson, 2009. "Why Do Europeans Work So Little?," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 50(1), pages 39-61, 02.
  6. Lucas, Robert E, Jr & Rapping, Leonard A, 1969. "Real Wages, Employment, and Inflation," Journal of Political Economy, University of Chicago Press, vol. 77(5), pages 721-54, Sept./Oct.
  7. Lucas, Robert Jr., 1972. "Expectations and the neutrality of money," Journal of Economic Theory, Elsevier, vol. 4(2), pages 103-124, April.
  8. Gary Hansen, 2010. "Indivisible Labor and the Business Cycle," Levine's Working Paper Archive 233, David K. Levine.
  9. Steven J. Davis & Magnus Henrekson, 2004. "Tax Effects on Work Activity, Industry Mix and Shadow Economy Size: Evidence from Rich-Country Comparisons," NBER Working Papers 10509, National Bureau of Economic Research, Inc.
  10. Christiano, Lawrence J & Eichenbaum, Martin, 1992. "Current Real-Business-Cycle Theories and Aggregate Labor-Market Fluctuations," American Economic Review, American Economic Association, vol. 82(3), pages 430-50, June.
  11. repec:cup:macdyn:v:7:y:2003:i:5:p:691-710 is not listed on IDEAS
  12. Harold L. Cole & Lee E. Ohanian, 1999. "The Great Depression in the United States from a neoclassical perspective," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Win, pages 2-24.
  13. Michele Boldrin & Lawrence J. Christiano & Jonas D.M. Fisher, 1999. "Habit persistence, asset returns and the business cycles," Working Paper Series WP-99-14, Federal Reserve Bank of Chicago.
  14. Mendoza, Enrique G. & Razin, Assaf & Tesar, Linda L., 1994. "Effective tax rates in macroeconomics: Cross-country estimates of tax rates on factor incomes and consumption," Journal of Monetary Economics, Elsevier, vol. 34(3), pages 297-323, December.
  15. Daniel Feenberg & Elisabeth Coutts, 1993. "An introduction to the TAXSIM model," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 12(1), pages 189-194.
  16. Timothy Kehoe & Edward Prescott, 2002. "Data Appendix to Great Depressions of the Twentieth Century," Technical Appendices kehoe02, Review of Economic Dynamics.
  17. Kydland, Finn E & Prescott, Edward C, 1982. "Time to Build and Aggregate Fluctuations," Econometrica, Econometric Society, vol. 50(6), pages 1345-70, November.
  18. Patrick J. Kehoe & Ellen R. McGrattan, 2002. "Accounting for the Great Depression," American Economic Review, American Economic Association, vol. 92(2), pages 22-27, May.
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  1. The State of Laziness
    by Matt Mitchell in Neighborhood Effects on 2010-08-06 15:23:31
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