Cross-country differences in preferences for leisure

Andreas Ek

Labour Economics, 2021, vol. 72, issue C

Abstract: The starting point of this paper is to document considerable cross-country variation in the “labor wedge”, a common measure of labor market frictions. Its variation is theoretically isomorphic to differences in a preference-for-leisure parameter. The paper proceeds to investigate what might explain the variation. It presents three separate empirical exercises supportive of the view that, to a substantial extent, cross-sectional labor-wedge differences are capturing systematic differences in leisure preferences. Firstly, in cross-country regressions, a cultural measure of preferences for leisure, elicited from the World Values Survey, contains economically larger and statistically more robust explanatory power than do traditional measures of labor market frictions. Secondly, following the epidemiological approach, individual-level data on labor-supply choices of descendants of immigrants in the United States and Sweden line up with what an “inherited” preference for leisure would predict. Thirdly, in the spirit of an out-of-sample test, the paper looks at the implication of differences in preferences for cross-country differences in optimal labor taxation. Economic theory suggests a negative association between preferences for leisure and labor taxes; empirical data verify the theoretical prediction.

Keywords: Labor supply; Economics of culture; Optimal taxation (search for similar items in EconPapers)
JEL-codes: A13 E62 J22 O57 Z10 Z13 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:labeco:v:72:y:2021:i:c:s0927537121000890

DOI: 10.1016/j.labeco.2021.102054

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