Working Paper: CEPR ID: DP8328
Authors: Liwa Rachel Ngai; Christopher Pissarides
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 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 nineteen OECD countries.
Keywords: allocation of time; home production; multisector model; social subsidies; tax wedge
JEL Codes: E2; H5; J2
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Tax policy (H29) | Substitution between market and home production (D13) |
| Taxation (H20) | Shift to home production (D13) |
| High taxation (H29) | Reduced hours worked in sectors with close home substitutes (J29) |
| High taxation (H29) | Reduced hours worked in sectors without home substitutes (J22) |
| Subsidies (H20) | Increased hours in subsidized sectors (J38) |
| Differential tax treatment (H25) | Asymmetric responses in labor allocation (J29) |
| Differences in tax regimes (H25) | Differences in work hour allocation (J29) |