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Productivity, Taxes, and Hours Worked in Spain: 1970-2015

Juan Carlos Conesa () and Timothy Kehoe ()

No 550, Staff Report from Federal Reserve Bank of Minneapolis

Abstract: In the early 1970s, hours worked per working-age person in Spain were higher than in the United States. Starting in 1975, however, hours worked in Spain fell by 40 percent. We find that 80 percent of the decline in hours worked can be accounted for by the evolution of taxes in an otherwise standard neoclassical growth model. Although taxes play a crucial role, we cannot argue that taxes drive all of the movements in hours worked. In particular, the model underpredicts the large decrease in hours in 1975–1986 and the large increase in hours in 1994–2007. The lack of productivity growth in Spain during 1994–2015 has little impact on the model’s prediction for hours worked.

Keywords: Dynamic general equilibrium; Hours worked; Distortionary taxes; Total factor productivity (search for similar items in EconPapers)
JEL-codes: C68 E13 E24 H31 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge, nep-his, nep-mac and nep-pbe
Date: 2017-07-10
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Journal Article: Productivity, taxes, and hours worked in Spain: 1970–2015 (2017) Downloads
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DOI: 10.21034/sr.550

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