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Taxes, Social Subsidies and the Allocation of Work Time

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  • Pissarides, Christopher
  • Ngai, Liwa Rachel

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 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 nineteen OECD countries.

Suggested Citation

  • Pissarides, Christopher & Ngai, Liwa Rachel, 2011. "Taxes, Social Subsidies and the Allocation of Work Time," CEPR Discussion Papers 8328, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:8328
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    More about this item

    Keywords

    Allocation of time; Home production; Multisector model; Social subsidies; Tax wedge;
    All these keywords.

    JEL classification:

    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • H5 - Public Economics - - National Government Expenditures and Related Policies
    • J2 - Labor and Demographic Economics - - Demand and Supply of Labor

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