Technological growth and hours in the long run: Theory and evidence

Magnus Reif, Mewael F. Tesfaselassie and Maik Wolters

No 162, IMFS Working Paper Series from Goethe University Frankfurt, Institute for Monetary and Financial Stability (IMFS)

Abstract: Over the last decades, hours worked per capita have declined substantially in many OECD economies. Using the standard neoclassical growth model with endogenous work-leisure choice, we assess the role of trend growth slowdown in accounting for the decline in hours worked. In the model, a permanent reduction in technological growth decreases steady state hours worked by increasing the consumption-output ratio. Our empirical analysis exploits cross-country variation in the timing and the size of the decline in technological growth to show that technological growth has a highly significant positive effect on hours. A decline in the long-run trend of technological growth by one percentage point is associated with a decline in trend hours worked in the range of one to three percent. This result is robust to controlling for taxes, which have been found in previous studies to be an important determinant of hours. Our empirical finding is quantitatively in line with the one implied by a calibrated version of the model, though evidence for the model's implication that the effect on hours works via changes in the consumption-output ratio is rather mixed.

Keywords: Productivity growth; technological growth; working hours; employment (search for similar items in EconPapers)
JEL-codes: E24 O40 (search for similar items in EconPapers)
Date: 2021
New Economics Papers: this item is included in nep-dge, nep-gro, nep-mac and nep-tid
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Journal Article: Technological Growth and Hours in the Long Run: Theory and Evidence (2021)
Working Paper: Technological Growth and Hours in the Long Run: Theory and Evidence (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:imfswp:162

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