Differences in hours worked in the OECD: institutions or fiscal policies?

Tino Berger and F. Heylen ()
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F. Heylen: -

Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium from Ghent University, Faculty of Economics and Business Administration

Abstract: This paper studies the determinants of the level and the evolution of per capita hours worked in a panel of OECD countries since the 1970s. Following Pesaran (Econometrica, 2006), our empirical strategy allows for the possibility of cross-sectionally correlated error terms due to unobserved common factors which are potentially non-stationary. We find that much of the variation in hours worked across countries and over time can be explained by differences in fiscal policy, i.e. differences in the level and structure of taxes and in the structure of government expenditures. Hours worked rise when labour taxes and non-employment benefits fall and when the shares of productive government expenditures and government wage consumption increase. Differences in (the evolution of) labour and product market institutions have much less of a role to play. Our results show that a careful treatment of the time-series properties of the data is crucial.

Keywords: hours worked; taxes; government expenditures; labour market institutions; panel data (search for similar items in EconPapers)
JEL-codes: C33 E24 E62 H20 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2009-07
New Economics Papers: this item is included in nep-lab
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Citations: View citations in EconPapers (3)

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http://wps-feb.ugent.be/Papers/wp_09_601.pdf (application/pdf)

Related works:
Journal Article: Differences in Hours Worked in the OECD: Institutions or Fiscal Policies? (2011)
Journal Article: Differences in Hours Worked in the OECD: Institutions or Fiscal Policies? (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:rug:rugwps:09/601

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