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American Economic Journal: Macroeconomics: Vol. 3 No. 4 (October 2011)

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Taxes, Social Subsidies, and the Allocation of Work Time

Article Citation

Ngai, L. Rachel, and Christopher A. Pissarides. 2011. "Taxes, Social Subsidies, and the Allocation of Work Time." American Economic Journal: Macroeconomics, 3(4): 1-26.

DOI: 10.1257/mac.3.4.1

Abstract

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. (JEL H24, H31, J22)

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Authors

Ngai, L. Rachel (Centre for Economic Performance, London School of Economics)
Pissarides, Christopher A. (Centre for Economic Performance, London School of Economics)

JEL Classifications

H24: Personal Income and Other Nonbusiness Taxes and Subsidies; includes inheritance and gift taxes
H31: Fiscal Policies and Behavior of Economic Agents: Household
J22: Time Allocation and Labor Supply

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American Economic Journal: Macroeconomics


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