Working Paper: CEPR ID: DP5440
Authors: Liwa Rachel Ngai; Christopher Pissarides
Abstract: We study long-run trends in aggregate market hours of work and shifts across economic sectors within the context of balanced aggregate growth. We show that a model of many goods and uneven TFP growth in market and home production can rationalize the observed falling or U-shaped aggregate hours and structural change across market sectors. The dynamics of market hours are driven by substitutions between home and market production and depend critically on the existence of many market sectors. Extensions show how the model can explain rising leisure and more complex hours dynamics without violating balanced aggregate growth.
Keywords: balanced growth; home production; hours of work; labour supply; marketization; structural transformation
JEL Codes: J21; J22; O14; O41
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| home production (D13) | market hours (G14) |
| market hours (G14) | home production (D13) |
| TFP growth (O49) | labor allocation (J22) |
| structural transformation force (P39) | market hours (G14) |
| market service sector TFP growth > home service sector TFP growth (L89) | labor moves from home production to market services (J46) |
| economic development (O29) | market hours (G14) |