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Government and the labour market: a transatlantic comparison

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European View

Abstract

This paper documents the large differences in hours of work between the US and many European countries and how these differences have changed over time. It then discusses different explanations for these differences and presents evidence to suggest that it is differences in the scale of government activity, financed by taxes that distort the incentive to work, that are the prime factor behind the differences.

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Notes

  1. Understanding the differences in unemployment rates is interesting in its own right, since unemployment is potentially influenced by different forces. I refer the reader to papers by Krugman [9], Bertola and Ichino [1], Ljungqvist and Sargent [10], Marimon and Zilibotti [11], Mortensen and Pissarides [13], Blanchard and Wolfers [2], Daveri and Tabellini [3], Nickell, Nunziata and Ochel [14], Pissarides [16] and Hornstein, Krusell and Violante [8] for an analysis of this issue, and the role played by different labour market policies.

  2. A related issue has to do with understanding the fact that hours of work are relatively higher in Scandinavia than in continental Europe, despite the fact that a greater share of resources flow through the government in Scandinavia. Ragan [18] and Rogerson [21] have argued that labour income, consumption and payroll can account for the bulk of the decrease in hours worked in continental Europe.

  3. In comparing countries using the 2003 data it is important to be aware of changes in survey design in the US. Relative to earlier surveys in the US, the American Time Use Survey, initiated as part of the CPS (Child Protective Services), tends to generate larger amounts of time reported to childcare. In the US this results in an almost 50% increase in time devoted to childcare relative to the 1985 time use survey data.

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Correspondence to Richard Rogerson.

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Rogerson, R. Government and the labour market: a transatlantic comparison. European View 8, 87–95 (2009). https://doi.org/10.1007/s12290-009-0076-8

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