Why Do People Work So Hard?
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Paul Scanlon: Trinity College Dublin
No 1206, 2018 Meeting Papers from Society for Economic Dynamics
Labor hours tend to fall as an economy develops, but subsequently tend to stabilize. I present a model that explains long-run trends in labor supply by the interaction of two opposing forces: a rising real wage, which lowers labor supply, and increasing product variety, which raises it. Both forces arise from the same source---innovation---and on a balanced growth path their interaction can sustain stable labor hours. Calibrating the model over the period 1959-2000, for benchmark parameters it can explain on average 80 percent of the discrepancy between hours predicted by the standard CIES one-good model and the data.
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed018:1206
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