Why Do Americans Work so Much More than Europeans?

31 Pages Posted: 13 Sep 2010 Last revised: 27 Dec 2011

See all articles by Edward C. Prescott

Edward C. Prescott

Arizona State University (ASU) - Economics Department; National Bureau of Economic Research (NBER)

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Date Written: February 2004

Abstract

Americans now work 50 percent more than do the Germans, French, and Italians. This was not the case in the early 1970s when the Western Europeans worked more than Americans. In this paper, I examine the role of taxes in accounting for the differences in labor supply across time and across countries, in particular, the effect of the marginal tax rate on labor income. The population of countries considered is that of the G-7 countries, which are the major advanced industrial countries. The surprising finding is that this marginal tax rate accounts for the predominance of the differences at points in time and the large change in relative labor supply over time with the exception of the Italian labor supply in the early 1970s. This finding has important implications for policy, in particular for making social security programs solvent.

Suggested Citation

Prescott, Edward C., Why Do Americans Work so Much More than Europeans? (February 2004). NBER Working Paper No. w10316. Available at SSRN: https://ssrn.com/abstract=1674785

Edward C. Prescott (Contact Author)

Arizona State University (ASU) - Economics Department ( email )

Tempe, AZ 85287-3806
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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