Heterogeneity and long-run changes in aggregate hours and the labor wedge

Simona Cociuba () and Alexander Ueberfeldt

Journal of Economic Dynamics and Control, 2015, vol. 52, issue C, 75-95

Abstract: From 1961 to 2007, U.S. aggregate hours worked increased and the labor wedge—measured as the discrepancy between a representative household׳s marginal rate of substitution and the marginal product of labor—declined substantially. The labor wedge is negatively related to hours and is often attributed to labor income taxes. However, U.S. labor income taxes increased since 1961. We examine a model with gender and marital status heterogeneity which accounts for the trends in the U.S. hours and the labor wedge. Apart from taxes, the model׳s labor wedge reflects non-distortionary cross-sectional differences in households׳ hours worked and productivity. We provide evidence that household heterogeneity is important for long-run changes in labor wedges and hours in other OECD economies.

Keywords: Labor wedge; Household aggregation; Female and male labor supply; Gender wage gap; Labor income taxation (search for similar items in EconPapers)
JEL-codes: E24 H20 H31 J22 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:52:y:2015:i:c:p:75-95

DOI: 10.1016/j.jedc.2014.11.016

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