Why Do Europeans Work Less than Americans? Public Consumption and Welfare Benefits as a Cause of the North-Atlantic Divide

28 Pages Posted: 9 Apr 2015

See all articles by Axel Hall

Axel Hall

Reykjavik University

Gylfi Zoega

University of Iceland; University of London - Birkbeck College; Centre for Economic Policy Research (CEPR)

Date Written: March 31, 2015

Abstract

We propose an explanation of why Europeans choose to work fewer hours than Americans and also suffer higher rates of unemployment. Labor market regulations, unemployment benefits, and high levels of public consumption in many European countries reduce, ceteris paribus, the gains from being employed, which makes employed workers ask for higher wages relative to productivity. The higher wages make firms offer fewer vacancies, as well as raising the opportunity cost of working by enabling employed workers to enjoy time-consuming consumption activities. We find empirical support for our thesis.

Keywords: job search, unemployment, working hours

JEL Classification: J630, J640, J650

Suggested Citation

Hall, Axel and Zoega, Gylfi, Why Do Europeans Work Less than Americans? Public Consumption and Welfare Benefits as a Cause of the North-Atlantic Divide (March 31, 2015). CESifo Working Paper Series No. 5264, Available at SSRN: https://ssrn.com/abstract=2592331

Axel Hall

Reykjavik University ( email )

Ofanleiti 2
Reykjavik, 103
Iceland

Gylfi Zoega (Contact Author)

University of Iceland ( email )

IS-101 Reykjavik
Iceland

University of London - Birkbeck College ( email )

Malet Street
London, WC1E 7HX
United Kingdom

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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