A Century of Labor-Leisure Distortions

Casey Mulligan

No 8774, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: I construct direct measures of labor-leisure distortions for the American economy during the period 1889-1996, using a new method for empirically evaluating competitive equilibrium models and extending that method to some noncompetitive situations. I then compare measured labor-leisure distortions to proxies for potential restraints of trade: distortionary taxes and subsidies, labor market regulation, monopoly unionism, and search frictions. Distortions have grown steadily over the century, with the exception of the Great Depression (when distortions were above trend), WWII (below trend), and the 1980's (below trend). Marginal tax rates are well correlated with labor-leisure distortions at low frequencies, but cannot explain Depression, wartime, or 1980's distortions. Monopoly unionism might explain a small part of the Depression distortions, and the decline of unions might explain some of the reduced distortions in the 1980's. In general, I find the decade-to-decade aggregate fluctuations in consumption, wages, and work to be hard to reconcile with simple quantitative models of labor supply and demand.

JEL-codes: H20 H30 (search for similar items in EconPapers)
Date: 2002-02
New Economics Papers: this item is included in nep-lab, nep-pbe and nep-pke
Note: PE
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Citations: View citations in EconPapers (105)

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