[PPT] - Hours Worked Across the World: Facts and Driving Forces Nicola PowerPoint Presentation

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Hours Worked Across the World: Facts and Driving Forces

Nicola Fuchs-Sch¨ undeln

Goethe University Frankfurt

Anglo-German Foundation Annual Lecture April 18, 2018

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Hours Worked Across the World

1 Hours worked worldwide

Hours Worked Across the World Nicola Fuchs-Sch¨ undeln

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Hours Worked Across the World

1 Hours worked worldwide 2 Hours worked in Europe and the US

Decomposition of differences Europe vs. US

* Components: Employment rate, weeks worked, weekly hours * Demographics: Age structure, education, etc.

Hours Worked Across the World Nicola Fuchs-Sch¨ undeln

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Hours Worked Across the World

1 Hours worked worldwide 2 Hours worked in Europe and the US

Decomposition of differences Europe vs. US

* Components: Employment rate, weeks worked, weekly hours * Demographics: Age structure, education, etc.

3 Which groups show the largest differences?

Theory: Taxation as driving force

Hours Worked Across the World Nicola Fuchs-Sch¨ undeln

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1. Hours Worked in Poor and Rich Countries

Bick, Fuchs-Sch¨ undeln, and Lagakos (2018): “How Do Hours Worked Vary with Income? Cross-Country Evidence and Implications” American Economic Review, 108(1)

Micro data as only source of information for poor countries: Challenge of representativeness and comparability Labor force survey collection for 80 countries Results from 49 “core” countries with best comparability

Hours Worked Across the World Nicola Fuchs-Sch¨ undeln

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Analyzed Countries

Sample Core Non-Core N/A

Approx. 40% of world population live in analyzed countries

Hours Worked Across the World Nicola Fuchs-Sch¨ undeln

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Average Hours Worked per Adult (Age 15+)

CHE USA IRL NLD GBR AUT SWE DNK BEL DEU FIN FRA ITA ESP CYP GRC SVN CZE PRT HUN SVK EST TUR LTU MUS POL LVA BWA ZAF BGR ROM ALB COL PER NAM ECU MNG IRQ PAK LAO KHM VNM GHA KEN TZA UGA RWA TLS MWI

5 10 15 20 25 30 35 40 45 50 Hours per Week 7 7.5 8 8.5 9 9.5 10 10.5 11 ln(GDP per Capita)

Hours Worked Across the World Nicola Fuchs-Sch¨ undeln

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Average Hours Worked per Adult (Age 15+)

CHE USA IRL NLD GBR AUT SWE DNK BEL DEU FIN FRA ITA ESP CYP GRC SVN CZE PRT HUN SVK EST TUR LTU MUS POL LVA BWA ZAF BGR ROM ALB COL PER NAM ECU MNG IRQ PAK LAO KHM VNM GHA KEN TZA UGA RWA TLS MWI

5 10 15 20 25 30 35 40 45 50 Hours per Week 7 7.5 8 8.5 9 9.5 10 10.5 11 ln(GDP per Capita)

On average 29 hours in poor countries, 19 hours in rich countries

Hours Worked Across the World Nicola Fuchs-Sch¨ undeln

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Average Hours Worked per Adult & U.S. Time-Series

ALB AUT BEL BGR BWA CHE COL CYP CZE DEU DNK ECU ESP EST FIN FRA GBR GHA GRC HUN IRL IRQ ITA KEN KHM LAO LTU LVA MNG MUS MWI NAM NLD PAK PER POL PRT ROM RWA SVK SVN SWE TLS TUR TZA UGA USA VNM ZAF

1900 1933 1944 2005

5 10 15 20 25 30 35 40 45 50 Hours per Week 7 7.5 8 8.5 9 9.5 10 10.5 11 ln(GDP per Capita) Core Countries U.S. Time-Series (1900-2005)

Hours Worked Across the World Nicola Fuchs-Sch¨ undeln

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Implications for Welfare and Labor Productivity

Measurement of welfare differences:

Based on only consumption:

Rich countries have 12 times higher welfare than poor countries

Based on consumption and hours worked:

19 times higher welfare

Hours Worked Across the World Nicola Fuchs-Sch¨ undeln

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Implications for Welfare and Labor Productivity

Measurement of welfare differences:

Based on only consumption:

Rich countries have 12 times higher welfare than poor countries

Based on consumption and hours worked:

19 times higher welfare

Measurement of labor productivity differences:

GDP per worker 14 times higher in rich countries
GDP per hour worked 17 times higher in rich countries

Hours Worked Across the World Nicola Fuchs-Sch¨ undeln

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Relatively Homogeneous Picture

Hours worked per adult are higher in poor than in rich countries

for both margins (employment rate and hours per worker)
for men and women
for all education groups
for all age groups
in all sectors (except agriculture)

Hours Worked Across the World Nicola Fuchs-Sch¨ undeln

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Hours Worked of Men and Women

Men

CHE USA IRL NLD GBR AUT SWE DNK BEL DEU FIN FRA ITA ESP CYP GRC SVN CZE PRT HUN SVK EST TUR LTU MUS POL LVA BWA ZAF BGR ROM ALB COL PER NAM ECU MNG IRQ PAK LAO KHM VNM GHA KEN TZA UGA RWA TLS MWI

5 10 15 20 25 30 35 40 45 50 Hours per Week 7 7.5 8 8.5 9 9.5 10 10.5 11 ln(GDP per Capita)

Women

CHE USA IRL NLD GBR AUT SWE DNK BEL DEU FIN FRA ITA ESP CYP GRC SVN CZE PRT HUN SVK EST TUR LTU MUS POL LVA BWA ZAF BGR ROM ALB COL PER NAM ECU MNG IRQ PAK LAO KHM VNM GHA KEN TZA UGA RWA TLS MWI

5 10 15 20 25 30 35 40 45 50 Hours per Week 7 7.5 8 8.5 9 9.5 10 10.5 11 ln(GDP per Capita)

Difference of 9 hours between poor and rich countries for both genders

Hours Worked Across the World Nicola Fuchs-Sch¨ undeln

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Hours Worked over the Life Cycle

10 20 30 40 Hours per Week 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 Age Low-Income Middle-Income High-Income

Largest differences at retirement age Caveat: Cannot distinguish age and cohort effects

Components Hours Worked Across the World Nicola Fuchs-Sch¨ undeln

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2. Europe vs. US

Bick, Br¨ uggemann, and Fuchs-Sch¨ undeln (2017): “Hours Worked in Europe and the US: New Data, New Answers”

Data: Representative household surveys in US and Europe (Current Population Survey, European Labor Force Survey) Statistical decomposition of differences between Europe and US into components and demographic structure

Hours Worked Across the World Nicola Fuchs-Sch¨ undeln

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Analyzed European Countries

Hours Worked Across the World Nicola Fuchs-Sch¨ undeln

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Average Hours Worked per Person (Aged 15-64)

250 500 750 1,000 1,250

US Scandinavia Western Europe Eastern Europe Southern Europe

US SE NO DK CH UK AT DE NL BE FR IE CZ PL HU PT ES GR IT

time series Hours Worked Across the World Nicola Fuchs-Sch¨ undeln

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Statistical Decomposition: Results

Average hours worked in Europe 14% lower than in US

Fewer European weeks worked Lower European education levels 1/3 to 1/2 1/3 to 1/2 Residual Scandinavia & West. Europe: Lower weekly hours, but higher employment rates

East. & Southern Europe:

Lower employment rates, but higher weekly hours

Hours Worked Across the World Nicola Fuchs-Sch¨ undeln

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Different Components of Average Hours Worked

Weeks worked and employment rates

US CZ HU PL DK NO SE AT BE CH DE FR IE NL UK ES GR IT PT

43 44 45 46 47 48 49

Weeks Worked

50 55 60 65 70 75 80

Employment Rate (in %)

US CZ HU PL DK NO SE AT BE CH DE FR IE NL UK ES GR IT PT

31 33 35 37 39 41 43

Weekly Hours

50 55 60 65 70 75 80

Employment Rate (in %) Hours Worked Across the World Nicola Fuchs-Sch¨ undeln

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Different Components of Average Hours Worked

Weeks worked and employment rates

US CZ HU PL DK NO SE AT BE CH DE FR IE NL UK ES GR IT PT

43 44 45 46 47 48 49

Weeks Worked

50 55 60 65 70 75 80

Employment Rate (in %)

Weekly hours and employment rates

US CZ HU PL DK NO SE AT BE CH DE FR IE NL UK ES GR IT PT

31 33 35 37 39 41 43

Weekly Hours

50 55 60 65 70 75 80

Employment Rate (in %) Hours Worked Across the World Nicola Fuchs-Sch¨ undeln

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3. Europe vs. US:

Taxation and Labor Supply of Married Women

Bick and Fuchs-Sch¨ undeln (2018): “Taxation and Labor Supply of Married Couples across Countries: A Macroeconomic Analysis” Review of Economic Studies, forthcoming Bick and Fuchs-Sch¨ undeln (2017): “Quantifying the Disincentive Effects of Joint Taxation

n Married Women’s Labor Supply”

American Economic Review Papers and Proceedings, 107(5)

Hours Worked Across the World Nicola Fuchs-Sch¨ undeln

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Average Hours Worked per Person (Aged 25-54) by Gender and Marital Status

Men Women Married Single Married Single Mean 1761 1485 1028 1189 Married women work fewest, married men most hours

Hours Worked Across the World Nicola Fuchs-Sch¨ undeln

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Average Hours Worked per Person (Aged 25-54) by Gender and Marital Status

Men Women Married Single Married Single Mean 1761 1485 1028 1189 Standard deviation 104 111 180 101 Married women work fewest, married men most hours Married women exhibit largest differences across countries

Hours Worked Across the World Nicola Fuchs-Sch¨ undeln

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Average Hours Worked per Person (Aged 25-54) by Gender and Marital Status

Men Women Married Single Married Single Mean 1761 1485 1028 1189 Standard deviation 104 111 180 101 Correlation with Married Men 1.00 0.79 0.06 0.64 Married women work fewest, married men most hours Married women exhibit largest differences across countries Married women’s labor supply uncorrelated with married men’s

Hours Worked Across the World Nicola Fuchs-Sch¨ undeln

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Taxation: The Example of US, Germany, Sweden

Hours worked per married person (25-54) relative to US Men Women Germany

14%
34%

Sweden

16%
4%

US: lower average tax rates Germany and Sweden: higher average tax rates

Hours Worked Across the World Nicola Fuchs-Sch¨ undeln

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Taxation: The Example of US, Germany, Sweden

Hours worked per married person (25-54) relative to US Men Women Germany

14%
34%

Sweden

16%
4%

US: lower average tax rates Germany and Sweden: higher average tax rates US and Germany: joint taxation of married couples Sweden: separate taxation of married couples ֒ → Joint taxation lowers marginal tax rate of main earner, and increases marginal tax rate of secondary earner

Hours Worked Across the World Nicola Fuchs-Sch¨ undeln

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Joint Taxation System in Germany (“Ehegattensplitting”)

1958 Introduction of joint taxation:

Household income divided by two
Tax function applied to each half of household income

Hours Worked Across the World Nicola Fuchs-Sch¨ undeln

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Joint Taxation System in Germany (“Ehegattensplitting”)

1958 Introduction of joint taxation:

Household income divided by two
Tax function applied to each half of household income

⇒ Minimizes total tax burden of household

Hours Worked Across the World Nicola Fuchs-Sch¨ undeln

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Joint Taxation System in Germany (“Ehegattensplitting”)

1958 Introduction of joint taxation:

Household income divided by two
Tax function applied to each half of household income

⇒ Minimizes total tax burden of household ⇒ Same marginal tax rate for both spouses ⇒ Relative to separate taxation

* Primary earner: lower marginal tax rate * Secondary earner: higher marginal tax rate

Hours Worked Across the World Nicola Fuchs-Sch¨ undeln

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Joint Taxation System in Germany (“Ehegattensplitting”)

1958 Introduction of joint taxation:

Household income divided by two
Tax function applied to each half of household income

⇒ Minimizes total tax burden of household ⇒ Same marginal tax rate for both spouses ⇒ Relative to separate taxation

* Primary earner: lower marginal tax rate * Secondary earner: higher marginal tax rate

Precondition: Progressive tax system

Hours Worked Across the World Nicola Fuchs-Sch¨ undeln

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Tax Treatment and Effective Tax Rates

Hours Worked Taxation relative to US Men Women System ¯ τ(¯ hUS

m , 0)

¯ τ ′(¯ hUS

m , ¯

hUS

f

) US – – joint 21% 29% Germany

14%
34%

joint 31% 50% Sweden

16%
4%

separate 33% 30%

¯ τ Average tax rate if wife is not working ¯ τ ′ Average marginal tax rate on additional income of wife

Hours Worked Across the World Nicola Fuchs-Sch¨ undeln

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Macroeconomic Model of Labor Supply

Joint utility maximization of couple:

Utility from consumption (financed by income)
Utility from leisure (labor supply reduces leisure)
Fixed utility costs of working for wife
Taxation influences budget constraint

Hours Worked Across the World Nicola Fuchs-Sch¨ undeln

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Macroeconomic Model of Labor Supply

Joint utility maximization of couple:

Utility from consumption (financed by income)
Utility from leisure (labor supply reduces leisure)
Fixed utility costs of working for wife
Taxation influences budget constraint

How would married couples adjust hours worked after a move to separate taxation (without changing average tax burden)?

Hours Worked Across the World Nicola Fuchs-Sch¨ undeln

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Moving from Current System to Separate Taxation

100 -50

50 100 150 200 250 300 350 Hours Difference BE DE IE US NL IT DK ES FR PL PT CZ NO AT GR HU SE UK Women Men Hours Worked Across the World Nicola Fuchs-Sch¨ undeln

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Current Hours Worked of Married Couples

Differences in tax systems can explain part of the differences across European countries

Hours Worked Across the World Nicola Fuchs-Sch¨ undeln

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Employment Rates vs. Hours Worked per Employed Married Woman

time series, hours distribution Hours Worked Across the World Nicola Fuchs-Sch¨ undeln

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Summary: Hours Worked in International Comparison

1 Substantially higher hours worked in poor than in rich countries 2 Lower hours worked in Europe than in the US

Decomposition of differences Europe vs. US

* Components: Weeks worked, employment rate, weekly hours worked * Demographic factors: education

3 Largest differences for married women

Tax system (joint vs. separate taxation) as important driving factor

Hours Worked Across the World Nicola Fuchs-Sch¨ undeln

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Many thanks!

Hours Worked Across the World Nicola Fuchs-Sch¨ undeln

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Employment Rate

CHE USA IRL NLD GBR AUT SWE DNK BEL DEU FIN FRA ITA ESP CYP GRC SVN CZE PRT HUN SVK EST TUR LTU MUS POL LVA BWA ZAF BGR ROM ALB COL PER NAM ECU MNG IRQ PAK LAO KHM VNM GHA KEN TZA UGA RWA TLS MWI

10 20 30 40 50 60 70 80 90 100 Employment Rate (in %) 7 7.5 8 8.5 9 9.5 10 10.5 11 ln(GDP per Capita)

Employment rate decreases between low- and middle-income countries

Hours Worked Across the World Nicola Fuchs-Sch¨ undeln

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Hours Worked per Worker

CHE USA IRL NLD GBR AUT SWE DNK BEL DEU FIN FRA ITA ESP CYP GRC SVN CZE PRT HUN SVK EST TUR LTU MUS POL LVA BWA ZAF BGR ROM ALB COL PER NAM ECU MNG IRQ PAK LAO KHM VNM GHA KEN TZA UGA RWA TLS MWI

5 10 15 20 25 30 35 40 45 50 Hours per Week 7 7.5 8 8.5 9 9.5 10 10.5 11 ln(GDP per Capita)

Hours worked per worker first increase, then fall between middle- and high-income countries

back Hours Worked Across the World Nicola Fuchs-Sch¨ undeln

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Time Series of Hours Worked: Anglosaxon Countries

Source: Rogerson (2006)

Hours Worked Across the World Nicola Fuchs-Sch¨ undeln

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Time Series of Hours Worked: Western European Countries

Source: Rogerson (2006)

Hours Worked Across the World Nicola Fuchs-Sch¨ undeln

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Time Series of Hours Worked: UK and Others

Source: Rogerson (2006)

back Hours Worked Across the World Nicola Fuchs-Sch¨ undeln

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Time Series of Employment Rates of Married Women

30 40 50 60 70 80 Employment Rate (in %) 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 2013 2016 DE BE FR IT NL PT UK US

Hours Worked Across the World Nicola Fuchs-Sch¨ undeln

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Time Series of Hours Worked per Employed Married Woman

800 1000 1200 1400 1600 1800 Annual Hours 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 2013 2016 DE BE FR IT NL PT UK US

Hours Worked Across the World Nicola Fuchs-Sch¨ undeln

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Time Series of Hours Worked per Married Woman

400 600 800 1000 1200 1400 Annual Hours Per Person 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 2013 2016 DE BE FR IT NL PT UK US

back Hours Worked Across the World Nicola Fuchs-Sch¨ undeln

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Full- vs. Part-Time Work of Married Women: Southern Europe and US

Southern Europe and US (and Eastern Europe): Full-time work

Hours Worked Across the World Nicola Fuchs-Sch¨ undeln

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Full- vs. Part-Time Work of Married Women: Scandinavia

Scandinavia: Full-time work or part-time work with relatively high hours

Hours Worked Across the World Nicola Fuchs-Sch¨ undeln

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Full- vs. Part-Time Work of Married Women: Western Europe and Italy

Western Europe and Italy: Part-time work (“50% position”) important

Hours Worked Across the World Nicola Fuchs-Sch¨ undeln

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Full- vs. Part-Time Work of Married Women: Netherlands and UK

Netherlands and UK: Hours spread over full spectrum

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