Working Paper: NBER ID: w14400
Authors: Richard Rogerson
Abstract: This paper uses a simple model of labor supply extended to allow for home production to understand the extent to which differences in taxes can account for differences in time allocations between the US and Europe. Once home production is included, the elasticity of substitution between consumption and leisure is almost irrelevant in determining the response of market hours to higher taxes. But to account for observed differences in leisure and time spent in home production, one requires a large elasticity of substitution between consumption and leisure, and a small elasticity of substituion betwen time and goods in home production.
Keywords: No keywords provided
JEL Codes: E60; H20; J22
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| tax rates (H29) | labor supply decisions (J22) |
| tax rates (H29) | hours of market work (J29) |
| elasticity of substitution (market goods and time in home production) (D13) | quantitative role in tax increases (H29) |
| elasticity of substitution (consumption and leisure) (D11) | observed leisure and home production patterns (D13) |
| hours of market work (J29) | differences in leisure and home production time (D13) |