Hours worked: Explaining the cross-country differences through the effects of tax/benefit systems on the employment rate

In this paper, we explain the observed lower hours worked in Central and Nordic European countries since the 80s, relative to Anglo-Saxon countries, through the effects of the tax benefit/systems on the employment rate. To this end we develop a search and matching economy `a la Pissarides that then we use as laboratory to conduct several quantitative experiences using an accounting method.Aggregate hours of work, employment rate, labor taxes, consumption tax, labor market institutions, matching model

European vs American Hours Worked: assessing the role of the extensive and intensive margins

Europeans have worked less than Americans since the 1970s. In this paper, we quantify the relative importance of the extensive and intensive margins of aggregate hours of market work on the observed differences. Our counterfactual exercises show that the two dimensions of the extensive margin, the employment rate and the participation rate, explain the most of the total-hours-gap between regions. Moreover, both ratios have similar weight. Conversely, the intensive margin, measured by the number of hours worked per employee, has the smallest role.

Distortionary taxation, international business cycles and real wage: explaining some puzzling facts

In this paper, we show that fluctuations in distortive taxes can account for most puzzling features of the U.S. economy. Namely, the observed real wage rigidity, the international correlation of investment and labor inputs, and the so-called quantity puzzle (according to which cross-country correlation of outputs is higher than the one of consumptions). This is done in a two-country search and matching model with fairly standard separable preferences, extended to include a tax/benefit system.Distortive taxes, real wage rigidity, international business cycles, search, matching

European vs. American Hours Worked: Assessing the Role of the Extensive and Intensive Margins

Europeans have worked less than Americans since the 1970s. In this paper, we quantify the relative importance of the extensive and intensive margins of aggregate hours of market work on the observed differences. Our counterfactual exercises show that the two dimensions of the extensive margin, the employment rate and the participation rate, explain the most of the total-hours-gap between regions. Moreover, both ratios have similar weight. Conversely, the intensive margin, measured by the number of hours worked per employee, has the smallest role.hours of market work, participation, employment, intensive and extensive margins

Explaining the Evolution of Hours Worked and Employment across OECD Countries: An Equilibrium Search Approach

Since 1960, the dynamics of the aggregate hours of market work exhibit dramatic differences across industrialized countries. Before 1980, these differences seem to come from the hours worked per employee (the intensive margin). However, since 1980 a notable feature of the data is that the divergence across countries responds to quantitatively important differences along the employment rate (the extensive margin). In this paper we develop an equilibrium matching model where both margins are endogenous. The model is rich enough to account for the behavior of the two margins of the aggregate hours when we include the observed heterogeneity across countries of both the taxes and the labor market institutions such as the unemployment benefits and the bargaining power. Because these findings come from an unified framework, they also give a strong support to the matching models.hours worked, intensive and extensive margins, taxation, labor market institutions, matching model

How do Labor Market Institutions affect the Link between Growth and Unemployment: the case of the European countries

This paper analyzes how the frictions in the labor market simultaneously affect the economic growth and the long run unemployment. To this goal, we develop a schumpeterian model of endogenous growth: agents have the choice between employment and R and D activities. Unemployment is caused by the wage-setting behavior of unions. We show that: (i) Increases in the labor costs or in the power of trade unions lead to higher unemployment and lower economic growth. (ii) Efficient bargain allows to increase employment, at the price of a lower growth rate. These theoretical predictions are consistent with the insights from our empirical analysis based on 183 European Regions, between 1980-2003endogenous growth, unemployment, labor market institutions

European vs. American hours worked: assessing the role of the extensive and intensive margins

Europeans have worked less than Americans since the 1970s. In this paper, we quantify the relative importance of the extensive and intensive margins of aggregate hours of market work on the observed differences. Our counterfactual exercises show that the two dimensions of the extensive margin, the employment rate and the participation rate, explain the most of the total-hours-gap between regions. Moreover, both ratios have similar weight. Conversely, the intensive margin, measured by the number of hours worked per employee, has the smallest role

Explaining labor wedge trends: An equilibrium search approach

In this paper, we present a search and matching model of the labor market and use this as a device to explain the long-run variation in the aggregate hours worked in several OECD countries over the period 1980-2013. The model distinguishes between hours worked per employee (intensive margin) and the employment rate (extensive margin) and includes a tax/benefit system. This allows us to assess the impact of the observed time-varying heterogeneity of taxes, unemployment benefits, and workers' bargaining power on the two margins. Our method is based on an accounting procedure. Once it has been calibrated, we find that, for the ten countries of the sample, our search economy is able to explain the patterns of the two margins of aggregate hours worked over the 1980-2013 period, when it includes the cross-country heterogeneity of the labor market institutions