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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. In this paper, I examine the role of taxes in accounting for the differences in labor supply across time and across countries, in particular, the effect of the marginal tax rate on labor income. The population of countries considered is that of the G-7 countries, which are the major advanced industrial countries. The surprising finding is that this marginal tax rate accounts for the predominance of the differences at points in time and the large change in relative labor supply over time with the exception of the Italian labor supply in the early 1970s. This finding has important implications for policy, in particular for making social security programs solvent.

Suggested Citation

  • Edward C. Prescott, 2004. "Why do Americans Work so Much More than Europeans?," NBER Working Papers 10316, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:10316
    Note: AG EFG PE
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    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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