Has the Government Lowered the Hours Worked? Evidence from Japan

Jun-Hyung Ko

MPRA Paper from University Library of Munich, Germany

Abstract: Why does the hours worked show a decreasing pattern in the postwar Japanese economy? This paper answers this question in the background of the changing pattern of government spending and tax-imposing behaviors. We construct and simulate a standard optimal growth model with the following key features: various taxes and subsidies. Our main findings are as follows. First, we quantitatively find that the increasing pattern of taxes on labor income played a crucial role in influencing the declining pattern of hours worked in Japan. Second, consumption tax and subsidy have a limited role in explaining the labor supply because they cancel each other out. Third, pension benefit may influence the retirement of the people in their sixties but has a minor effect on the hours worked. Fourth, the legal reduction in the workweek length in 1990 can explain the low level of the hours worked since 1990. Fifth, subsistence consumption can account for the slope of hours worked but cannot explain the long-run level.

Keywords: marginal tax rate; subsidy; hours worked; pension benefit (search for similar items in EconPapers)
JEL-codes: E24 E32 E62 (search for similar items in EconPapers)
Date: 2011-04
New Economics Papers: this item is included in nep-dge, nep-lab and nep-mac
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:30058

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