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Understanding Growth and Inequality Trends: The Role of Labor Supply in the USA and Germany

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  • Lars Osberg

Abstract

Within the OECD, there are significant differences in the trend and level of average work hours. [For example, from 1980 to 2000, average working hours per adult (ages 15-64) rose by 234 hours in the USA to 1476 while falling by 170 hours in Germany, to 973]. Since these trends appear to be continuing (Merz, 2000) growth in per capita GDP may be a poor indicator of trends in average economic well-being. To the extent that rising inequality in money income is driven by changes in the distribution of working hours, trends in money income inequality may misrepresent trends in the inequality of economic well-being. Recently Bell and Freeman (2000) have argued that greater inequality in the USA provides the incentive that motivates greater work effort by Americans. However, changes in working hours, and differentials in working hours across countries, have been quite concentrated in particular demographic groups and largely arise from differences in labor force participation. [For example, the paid working hours of women in the USA have risen significantly, while German men aged 55 to 64 have reduced their labor force participation.] Except for the extreme lower tail, the distribution of working hours of prime age males is essentially identical and constant in Germany and the US. - which implies that the greater inequality of earnings in the USA has no noticeable incentive effect on the labor supply of workers.

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  • Lars Osberg, 2002. "Understanding Growth and Inequality Trends: The Role of Labor Supply in the USA and Germany," LIS Working papers 302, LIS Cross-National Data Center in Luxembourg.
    • Handle: RePEc:lis:liswps:302
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    References listed on IDEAS

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    1. Elster,Jon & Roemer,John E. (ed.), 1993. "Interpersonal Comparisons of Well-Being," Cambridge Books, Cambridge University Press, number 9780521457224, May.
    2. 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 269-291, April.
    3. 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.
    4. Ed Diener & Eunkook Suh, 1997. "Measuring Quality Of Life: Economic, Social, And Subjective Indicators," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 40(1), pages 189-216, January.
    5. Ellen R. McGrattan & Richard Rogerson, 1998. "Changes in hours worked since 1950," Quarterly Review, Federal Reserve Bank of Minneapolis, vol. 22(Win), pages 2-19.
    6. 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 116-121, May.
    7. 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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    Cited by:

    1. Alberto Alesina & Edward Glaeser & Bruce Sacerdote, 2005. "Work and Leisure in the U. S. and Europe: Why so Different?," Harvard Institute of Economic Research Working Papers 2068, Harvard - Institute of Economic Research.
    2. Steffen Otterbach, 2010. "Mismatches Between Actual and Preferred Work Time: Empirical Evidence of Hours Constraints in 21 Countries," Journal of Consumer Policy, Springer, vol. 33(2), pages 143-161, June.
    3. Stephen P. Jenkins & Lars Osberg, 2003. "Nobody to Play with?: The Implications of Leisure Coordination," Discussion Papers of DIW Berlin 368, DIW Berlin, German Institute for Economic Research.
    4. Constantinos Alexiou & Adimulya Kartiyasa, 2020. "Does greater income inequality cause increased work hours? New evidence from high income economies," Bulletin of Economic Research, Wiley Blackwell, vol. 72(4), pages 380-392, October.
    5. Peter Frase & Janet Gornick, 2009. "The Time Divide in Cross-National Perspective: The Work Week, Gender and Education in 17 Countries," LIS Working papers 526, LIS Cross-National Data Center in Luxembourg.
    6. Merz, Joachim & Osberg, Lars, 2006. "Keeping in Touch – A Benefit of Public Holidays," MPRA Paper 5738, University Library of Munich, Germany.
    7. Hugh Millward & Jamie Spinney, 2009. "Time use and rurality – Canada 2005," electronic International Journal of Time Use Research, Research Institute on Professions (Forschungsinstitut Freie Berufe (FFB)) and The International Association for Time Use Research (IATUR), vol. 6(1), pages 109-129, September.
    8. Timo Anttila & Tomi Oinas & Jouko Nätti, 2009. "Predictors of time famine among Finnish employees – Work, family or leisure?," electronic International Journal of Time Use Research, Research Institute on Professions (Forschungsinstitut Freie Berufe (FFB)) and The International Association for Time Use Research (IATUR), vol. 6(1), pages 73-91, September.
    9. Katerina Vrotsou & Kajsa Ellegård & Matthew Cooper, 2009. "Exploring time diaries using semi-automated activity pattern extraction," electronic International Journal of Time Use Research, Research Institute on Professions (Forschungsinstitut Freie Berufe (FFB)) and The International Association for Time Use Research (IATUR), vol. 6(1), pages 1-25, September.
    10. Heather Boushey & Christian E. Weller, 2006. "Inequality and Household Economic Hardship in the United States of America," Working Papers 18, United Nations, Department of Economics and Social Affairs.
    11. Killian Mullan & Lyn Craig, 2009. "Harmonising extended measures of parental childcare in the time-diary surveys of four countries – Proximity versus responsibility," electronic International Journal of Time Use Research, Research Institute on Professions (Forschungsinstitut Freie Berufe (FFB)) and The International Association for Time Use Research (IATUR), vol. 6(1), pages 48-72, September.
    12. Julian Lamont, 2008. "Incentives and reflective equilibrium in distributive justice debates," The Journal of Philosophical Economics, Bucharest Academy of Economic Studies, The Journal of Philosophical Economics, vol. 2(1), pages 5-19, November.
    13. Sajeda Amin & Luciana Suran, 2009. "Terms of marriage and time-use patterns of young wives – Evidence from rural Bangladesh," electronic International Journal of Time Use Research, Research Institute on Professions (Forschungsinstitut Freie Berufe (FFB)) and The International Association for Time Use Research (IATUR), vol. 6(1), pages 92-108, September.
    14. Lars Osberg & Andrew Sharpe, 2003. "Human Well-being and Economic Well-being: What Values Are Implicit in Current Indices?," CSLS Research Reports 2003-04, Centre for the Study of Living Standards.
    15. Sandra L. Hofferth, 2009. "Changes in American children’s time – 1997 to 2003," electronic International Journal of Time Use Research, Research Institute on Professions (Forschungsinstitut Freie Berufe (FFB)) and The International Association for Time Use Research (IATUR), vol. 6(1), pages 26-47, September.
    16. Joachim Merz & Lars Osberg, 2009. "Keeping in touch – A benefit of public holidays using time use diary data," electronic International Journal of Time Use Research, Research Institute on Professions (Forschungsinstitut Freie Berufe (FFB)) and The International Association for Time Use Research (IATUR), vol. 6(1), pages 130-166, September.

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