Lectures in Macroeconomics- Charles W. Upton Why Americans Work Harder . )] 100 log( [log 1 i i i i h c U
Lectures in Macroeconomics- Charles W. Upton Why Americans Work Harder.
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Lectures in Macroeconomics- Charles W. Upton
Why Americans Work Harder
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Why Americans Work Harder
GDP and Hours Worked, G7
Country
Hours Per
Week Per
Person 15-64
GDP Per Hour
(US=100)
GDP Per Person 15-64
(US =100)
Germany 19.3 99 74France 17.5 110 74Italy 16.5 90 57Canada 22.9 89 79United Kingdom 22.8 76 67Japan 27.0 74 78United States 25.9 100 100
Why Americans Work Harder
GDP and Hours Worked, G7
Country
Hours Per
Week Per
Person 15-64
GDP Per Hour
(US=100)
GDP Per Person 15-64
(US =100)
Germany 19.3 99 74France 17.5 110 74Italy 16.5 90 57Canada 22.9 89 79United Kingdom 22.8 76 67Japan 27.0 74 78United States 25.9 100 100
Why Americans Work Harder
GDP and Hours Worked, G7
Country
Hours Per
Week Per
Person 15-64
GDP Per Hour
(US=100)
GDP Per Person 15-64
(US =100)
Germany 19.3 99 74France 17.5 110 74Italy 16.5 90 57Canada 22.9 89 79United Kingdom 22.8 76 67Japan 27.0 74 78United States 25.9 100 100
GDP Figures are
OECD Purchasing
Power Parity
Data are 1993-1996
figures
Why Americans Work Harder
1970-74 Data
Country
Hours Per Week Per Person 15-64
GDP Per Hour
(US=100)
GDP Per Person 15-64
(US =100)
Germany 24.6 72 75France 24.4 74 77Italy 19.2 65 53Canada 22.2 91 86United Kingdom 25.9 62 68Japan 29.8 49 62United States 23.5 100 100
17.5
25.9
Why Americans Work Harder
1993-1996 Data
Country
Hours Per
Week Per
Person 15-64
GDP Per Hour
(US=100)
GDP Per Person 15-64
(US =100)
Germany 19.3 99 74France 17.5 110 74Italy 16.5 90 57Canada 22.9 89 79United Kingdom 22.8 76 67Japan 27.0 74 78United States 25.9 100 100
24.4
23.5
Why the differences? And why the
changes?
Why Americans Work Harder
1993-1996 Data
Country
Hours Per
Week Per
Person 15-64
GDP Per Hour
(US=100)
GDP Per Person 15-64
(US =100)
Germany 19.3 99 74France 17.5 110 74Italy 16.5 90 57Canada 22.9 89 79United Kingdom 22.8 76 67Japan 27.0 74 78United States 25.9 100 100
24.4
23.5
Why the differences? And why the
changes?
Lets look at a model by Edward Prescott
Why Americans Work Harder
Utility in the Prescott Model
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Why Americans Work Harder
The Immortal Consumer
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Why Americans Work Harder
Allowing for Leisure
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Why Americans Work Harder
The Final Equation
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Why Americans Work Harder
Optimization
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Why Americans Work Harder
Optimization
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Optimization
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Why Americans Work Harder
The Production Function
ittiit
itititit
XKK
LKAY
)1(1,
1
Why Americans Work Harder
The Tax on Consumption and Wages
s
wsw
1
*
Why Americans Work Harder
Hours Worked
)1(1
1
*w
it
yc
h
Why Americans Work Harder
Hours Worked
)1(1
1
*w
it
yc
h
The higher the value of leisure (i.e., the
higher the value of θ) the fewer hours
worked
Why Americans Work Harder
Hours Worked
)1(1
1
*w
it
yc
h
The higher the value of leisure (i.e., the
higher the value of θ) the fewer hours
worked
The higher the tax rate (i.e., the higher the value of τ) the fewer hours worked
Why Americans Work Harder
Fitting the Model
Country Tax rate τ c/y Actual Predicted
Germany 0.59 0.74 19.3 19.5
France 0.59 0.74 17.5 19.5
Italy 0.56 0.69 16.5 18.8
Canada 0.52 0.77 22.9 21.3
United Kingdom 0.44 0.83 22.8 22.8
Japan 0.37 0.68 27.0 29.0
United States 0.40 0.81 25.9 24.6
Why Americans Work Harder
Fitting the Model
Country Tax rate τ c/y Actual Predicted
Germany 0.59 0.74 19.3 19.5
France 0.59 0.74 17.5 19.5
Italy 0.56 0.69 16.5 18.8
Canada 0.52 0.77 22.9 21.3
United Kingdom 0.44 0.83 22.8 22.8
Japan 0.37 0.68 27.0 29.0
United States 0.40 0.81 25.9 24.6
The differences
are consistent with the tax
rates.
Moreover, the change is consistent
with changes in tax rates.
Why Americans Work Harder
Are Europeans Better Off?
D
SSRSLR
H*
w*
Hτ
Some argue that
Europeans are better off.
They get less income but
more leisure.
Why Americans Work Harder
Are Europeans Better Off?
D
SSRSLR
H*
w*
Hτ
Some argue that
Europeans are better off.
They get less income but
more leisure.
Any tax involves an
efficiency loss.
Why Americans Work Harder
Are Europeans Better Off?
D
SSRSLR
H*
w*
Hτ
US
France
Why Americans Work Harder
Are Europeans Better Off?
D
SSRSLR
H*
w*
Hτ
US
France
Prescott estimates that if France reduced its taxes to US rates, it would
amount to a 19% gain in
consumption
Why Americans Work Harder
End
©2004 Charles W. Upton. All rights reserved
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