Marriage stability, taxation and aggregate labor supply in the U.S. vs. Europe

Indraneel Chakraborty, Hans A. Holter and Serhiy Stepanchuk

Journal of Monetary Economics

Photo: Elsevier

Published in:

Journal of Monetary Economics 2015 72 pp. 1-20.

DOI: 10.1016/j.jmoneco.2015.01.001

Link to the paper

Abstract:

Americans work more than Europeans. Using micro-data from the United States and 17 European countries, we document that women are typically the largest contributors to the cross-country differences in work hours. We also show that there is a negative relation between taxes and annual hours worked, driven by men, and a positive relation between divorce rates and annual hours worked, driven by women. In a calibrated life-cycle model with heterogeneous agents, marriage and divorce, we find that the divorce and tax mechanisms together can explain 45% of the variation in labor supply between the United States and the European countries.

Published May 4, 2015 9:33 AM - Last modified Oct. 14, 2016 1:23 PM