Why Do People Work So Hard?

Paul Scanlon
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Paul Scanlon: Trinity College Dublin

No 1206, 2018 Meeting Papers from Society for Economic Dynamics

Abstract: Labor hours tend to fall as an economy develops, but subsequently tend to stabilize. I present a model that explains long-run trends in labor supply by the interaction of two opposing forces: a rising real wage, which lowers labor supply, and increasing product variety, which raises it. Both forces arise from the same source---innovation---and on a balanced growth path their interaction can sustain stable labor hours. Calibrating the model over the period 1959-2000, for benchmark parameters it can explain on average 80 percent of the discrepancy between hours predicted by the standard CIES one-good model and the data.

Date: 2018
New Economics Papers: this item is included in nep-gro and nep-ltv
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