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Taxes, social subsidies, and the allocation of work time

By L. Rachel Ngai and Christopher A. Pissarides


We examine the allocation of hours of work across industrial sectors in OECD countries. We find large disparities across three sector groups, one that produces goods without home substitutes, and two others that have home substitutes but are treated differently by welfare policy. We attribute the disparities to the countries' tax and subsidy policies. High taxation substantially reduces hours in sectors that have close home substitutes but less so in other sectors. Subsidies increase hours in the subsidized sectors that have home substitutes. We compute these policy effects for 19 OECD countries

Topics: HB Economic Theory, HD Industries. Land use. Labor, HJ Public Finance
Publisher: American Economic Association
Year: 2011
DOI identifier: 10.1257/mac.3.4.1
OAI identifier:
Provided by: LSE Research Online

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