WHY DO EUROPEANS WORK (MUCH) LESS? IT IS TAXES AND GOVERNMENT SPENDING

Tine Dhont and Freddy Heylen

Economic Inquiry, 2008, vol. 46, issue 2, 197-207

Abstract: We develop and calibrate a theoretical model that explains per capita hours worked and output growth as a function of three fiscal policy variables. Differences in income taxes, productive government expenditures, and nonemployment transfers are sufficient to answer the question why Europeans work (much) less than Americans and why some Europeans work less than others. Differences in taste for leisure have little role to play given the actual variation of these three policy variables. (JEL E24, E62, J22, O41)

Date: 2008
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