Why Are Average Hours Worked Lower in Richer Countries?

Alexander Bick, Nicola Fuchs-Schündeln, David Lagakos and Hitoshi Tsujiyama

No 8251, CESifo Working Paper Series from CESifo

Abstract: Why are average hours worked per adult lower in rich countries than in poor countries? We consider two natural explanations: income effects in preferences, in which leisure becomes more valuable when income rises, and distortionary tax systems, which are more prevalent in richer countries. To assess the importance of these two forces, we build a simple model of labor supply by heterogeneous individuals and calibrate it to match international data on labor income taxation, government transfers relative to GDP, and hours worked per adult. The model predicts that income effects are the main driving force behind the decline of average hours worked with GDP per capita. We reach a similar conclusion in an extended model that matches cross-country patterns of labor supply along the extensive and intensive margins and of the prevalence of subsistence self-employment.

Keywords: hours worked; income effects; taxation (search for similar items in EconPapers)
JEL-codes: E24 J22 O11 (search for similar items in EconPapers)
Date: 2020
New Economics Papers: this item is included in nep-lma, nep-mac and nep-pbe
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Related works:
Working Paper: Why Are Average Hours Worked Lower in Richer Countries? (2020)
Working Paper: Why are Average Hours Worked Lower in Richer Countries? (2019)
Working Paper: Why are Average Hours Worked Lower in Richer Countries? (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_8251

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