Working Paper: NBER ID: w23592
Authors: Juan Carlos Conesa; Timothy J. Kehoe
Abstract: In the early 1970s, hours worked per working-age person in Spain were higher than in the United States. Starting in 1975, however, hours worked in Spain fell by 40 percent. We find that 80 percent of the decline in hours worked can be accounted for by the evolution of taxes in an otherwise standard neoclassical growth model. Although taxes play a crucial role, we cannot argue that taxes drive all of the movements in hours worked. In particular, the model underpredicts the large decrease in hours in 1975–1986 and the large increase in hours in 1994–2007. The lack of productivity growth in Spain during 1994–2015 has little impact on the model’s prediction for hours worked.
Keywords: productivity; taxes; hours worked; Spain
JEL Codes: C68; E13; E24; H31
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Taxes (H29) | Hours Worked (J22) |
| TFP (F16) | Hours Worked (J22) |
| Lack of TFP Growth (O49) | Hours Worked (J22) |
| Tax Evolution (H26) | Hours Worked (J22) |
| Taxes (H29) | TFP (F16) |