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Taxation and Market Work: Is Scandinavia an Outlier?

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  • Richard Rogerson

Abstract

This paper argues that it is essential to explicitly consider how the government spends tax revenues when assessing the effects of tax rates on aggregate hours of market work. Different forms of government spending imply different elasticities of hours of work with regard to tax rates. I illustrate the empirical importance of this point by addressing the issue of hours worked and tax rates in three sets of economies: the US, Continental Europe and Scandinavia. While tax rates are highest in Scandinavia, hours worked in Scandinavia are significantly higher than they are in Continental Europe. I argue that differences in the form of government spending can potentially account for this pattern.

Suggested Citation

  • Richard Rogerson, 2007. "Taxation and Market Work: Is Scandinavia an Outlier?," NBER Working Papers 12890, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:12890
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    References listed on IDEAS

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    JEL classification:

    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • J2 - Labor and Demographic Economics - - Demand and Supply of Labor

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