Market Work, Home Work and Taxes: A Cross Country Analysis
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.
This paper was prepared for a special issue of the Review of International Economics. The author acknowledges financial support from the NSF. The views expressed herein are those of the author(s) and do not necessarily reflect the views of the National Bureau of Economic Research.
Richard Rogerson, 2009. "Market Work, Home Work, and Taxes: A Cross-Country Analysis," Review of International Economics, Blackwell Publishing, vol. 17(3), pages 588-601, 08. citation courtesy of