Taxes, Social Subsidies and the Allocation of Work Time

47 Pages Posted: 18 Apr 2011

See all articles by Rachel Ngai

Rachel Ngai

London School of Economics & Political Science (LSE) - Department of Economics; Hong Kong University of Science & Technology (HKUST) - HKUST School of Business and Management

Christopher A. Pissarides

London School of Economics & Political Science (LSE); Centre for Economic Policy Research (CEPR); IZA Institute of Labor Economics; Hong Kong University of Science & Technology (HKUST)

Date Written: April 2011

Abstract

We examine the allocation of hours of work across industrial sectors in OECD countries. We find large disparities across three sector groups, one that produces goods without home substitutes, and two others that have home substitutes but treated differently by welfare policy. We attribute the disparities to the countries' tax and subsidy policies. High taxation substantially reduces hours in sectors that have close home substitutes but less so in other sectors. Subsidies increase hours in the subsidized sectors that have home substitutes. We compute these policy effects for nineteen OECD countries.

Keywords: allocation of time, home production, multisector model, social subsidies, tax wedge

JEL Classification: E2, H5, J2

Suggested Citation

Ngai, Liwa Rachel and Pissarides, Christopher, Taxes, Social Subsidies and the Allocation of Work Time (April 2011). CEPR Discussion Paper No. DP8328. Available at SSRN: https://ssrn.com/abstract=1810293

Liwa Rachel Ngai (Contact Author)

London School of Economics & Political Science (LSE) - Department of Economics ( email )

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Hong Kong University of Science & Technology (HKUST) - HKUST School of Business and Management ( email )

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Hong Kong

Christopher Pissarides

London School of Economics & Political Science (LSE) ( email )

Houghton Street
London WC2A 2AE
United Kingdom
+44 20 7955 7513 (Phone)
+44 20 7831 1840 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Hong Kong University of Science & Technology (HKUST) ( email )

Clearwater Bay
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Hong Kong

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