Understanding Growth and Inequality Trends: The Role of Labor Supply in the USA and Germany

Lars Osberg

No 302, LIS Working papers from LIS Cross-National Data Center in Luxembourg

Abstract: Within the OECD, there are significant differences in the trend and level of average work hours. [For example, from 1980 to 2000, average working hours per adult (ages 15-64) rose by 234 hours in the USA to 1476 while falling by 170 hours in Germany, to 973]. Since these trends appear to be continuing (Merz, 2000) growth in per capita GDP may be a poor indicator of trends in average economic well-being. To the extent that rising inequality in money income is driven by changes in the distribution of working hours, trends in money income inequality may misrepresent trends in the inequality of economic well-being. Recently Bell and Freeman (2000) have argued that greater inequality in the USA provides the incentive that motivates greater work effort by Americans. However, changes in working hours, and differentials in working hours across countries, have been quite concentrated in particular demographic groups and largely arise from differences in labor force participation. [For example, the paid working hours of women in the USA have risen significantly, while German men aged 55 to 64 have reduced their labor force participation.] Except for the extreme lower tail, the distribution of working hours of prime age males is essentially identical and constant in Germany and the US. - which implies that the greater inequality of earnings in the USA has no noticeable incentive effect on the labor supply of workers.

Pages: 40 pages
Date: 2002-04
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Citations: View citations in EconPapers (1)

Published in Canadian Public Policy 29, (2003): 163-184

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Persistent link: https://EconPapers.repec.org/RePEc:lis:liswps:302

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