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Home production, labor taxation and trade account

  • Luigi Bonatti

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    The two-country growth model developed in this paper incorporates home production and distinguishes between a market sector producing services that can also be home-produced and a market sector producing goods without home-produced substitutes. This distinction coincides in the model with the distinction between the sector producing internationally tradable goods and the sector producing nontradables. Hence, differentials in labor tax rates across countries, which determine differences in the allocation of households’ time between market activities and home activities, influence also the mix of tradable and nontradable goods that characterizes the market output of each country, thus affecting their bilateral trade balance.

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    Paper provided by Department of Economics, University of Trento, Italia in its series Department of Economics Working Papers with number 0715.

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    Date of creation: 2007
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    Handle: RePEc:trn:utwpde:0715
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    1. Richard B. Freeman & Ronald Schettkat, 2005. "Marketization of household production and the EU–US gap in work," Economic Policy, CEPR;CES;MSH, vol. 20(41), pages 6-50, 01.
    2. Catherine L. Mann, 2004. "The US Current Account, New Economy Services, and Implications for Sustainability," Review of International Economics, Wiley Blackwell, vol. 12(2), pages 262-276, 05.
    3. Conny Olovsson, 2004. "Why do Europeans Work so Little?," 2004 Meeting Papers 760, Society for Economic Dynamics.
    4. Stephen L. Parente & Richard Rogerson & Randall Wright, 2000. "Homework in Development Economics: Household Production and the Wealth of Nations," Journal of Political Economy, University of Chicago Press, vol. 108(4), pages 680-687, August.
    5. D'Agostino, Antonello & Serafini, Roberta & Ward, Melanie, 2006. "Sectoral explanations of employment in Europe: the role of services," Research Technical Papers 8/RT/06, Central Bank of Ireland.
    6. Alberto F. Alesina & Edward L. Glaeser & Bruce Sacerdote, 2006. "Work and Leisure in the U.S. and Europe: Why So Different?," NBER Chapters, in: NBER Macroeconomics Annual 2005, Volume 20, pages 1-100 National Bureau of Economic Research, Inc.
    7. Edward C. Prescott, 2003. "Why do Americans work so much more than Europeans?," Staff Report 321, Federal Reserve Bank of Minneapolis.
    8. Davis, Steven J. & Henrekson, Magnus, 2004. "Tax Effects on Work Activity, Industry Mix and Shadow Economy Size: Evidence from Rich-Country Comparisons," SSE/EFI Working Paper Series in Economics and Finance 560, Stockholm School of Economics.
    9. Ellen McGrattan & Richard Rogerson & Randall Wright, 1995. "An equilibrium model of the business cycle with household production and fiscal policy," Staff Report 191, Federal Reserve Bank of Minneapolis.
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