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Why do Europeans Work Less than Americans? Public Consumption and Welfare Benefits as a Cause of the North-Atlantic Divide

Author

Listed:
  • Axel Hall
  • Gylfi Zoega

Abstract

We propose an explanation of why Europeans choose to work fewer hours than Americans and also suffer higher rates of unemployment. Labor market regulations, unemployment benefits, and high levels of public consumption in many European countries reduce, ceteris paribus, the gains from being employed, which makes employed workers ask for higher wages relative to productivity. The higher wages make firms offer fewer vacancies, as well as raising the opportunity cost of working by enabling employed workers to enjoy time-consuming consumption activities. We find empirical support for our thesis.

Suggested Citation

  • Axel Hall & Gylfi Zoega, 2015. "Why do Europeans Work Less than Americans? Public Consumption and Welfare Benefits as a Cause of the North-Atlantic Divide," CESifo Working Paper Series 5264, CESifo.
    • Handle: RePEc:ces:ceswps:_5264
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    References listed on IDEAS

    as
    1. Richard Rogerson, 2006. "Understanding Differences in Hours Worked," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 9(3), pages 365-409, July.
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    4. Zoega, Gylfi, 1997. "Public Consumption and Unemployment," Scottish Journal of Political Economy, Scottish Economic Society, vol. 44(3), pages 269-279, August.
    5. Blanchard, Olivier & Wolfers, Justin, 2000. "The Role of Shocks and Institutions in the Rise of European Unemployment: The Aggregate Evidence," Economic Journal, Royal Economic Society, vol. 110(462), pages 1-33, March.
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    7. Layard, Richard & Nickell, Stephen & Jackman, Richard, 2005. "Unemployment: Macroeconomic Performance and the Labour Market," OUP Catalogue, Oxford University Press, number 9780199279173, Decembrie.
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    13. Gylfi Zoega, 1997. "Public Consumption and Unemployment," Scottish Journal of Political Economy, Scottish Economic Society, vol. 44(3), pages 269-279, August.
    14. Hall, Axel & Zoega, Gylfi, 2014. "Values and labor force participation in the Nordic countries," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 8, pages 1-43.
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    More about this item

    Keywords

    job search; unemployment; working hours;
    All these keywords.

    JEL classification:

    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings

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