Why Do Americans Work so Much More than Europeans

By Edward C. Prescott. 2004

590 citations recorded by the source corpus.

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. This article examines the role of taxes in accounting for the differences in labor supply across time and across countries; in particular, the effective marginal tax rate on labor income. The population of countries considered is the G-7 countries, which are major advanced industrial countries. The surprising fi nding is that this marginal tax rate accounts for the predominance of differences at points in time and the large change in relative labor supply over time.

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Citations in the corpus

Growth and Structural Transformation (2013, background): “Following Prescott (2004), there is a sizeable literature that seeks to understand the large differences in hours worked that have emerged over time between the US and countries in continental Europe.”
Why hasn't tax competition triggered a race to the bottom? Some quantitative lessons from the EU (2005, result): “In the case of France, this result is consistent with the argument of Prescott (2004) that movements in the effective labor tax factor played an important role in explaining the decline in hours worked during the 1990s.”
Taxation and Labor Supply of Married Couples Across Countries: A Macroeconomic Analysis (2018, unknown): “Explaining these large differences in the labor supply behavior of married men and married women with linear (average marginal) taxes – a prominent and successful predictor in explaining aggregate hours worked differences in the literature pioneered by Prescott (2004) – seems challenging.”
Structural Transformation and the Deterioration of European Labor Market Outcomes (2008, methodology): “It is worth commenting on the relationship between these results and those of Prescott (2004).”
The equilibrium effect of fundamentals on house prices and rents (2013, background): “Lastly, following Díaz and Luengo-Prado (2008) and Prescott (2004), the income tax rate is τy ¼ 0:20.”
Explaining International Fertility Differences (2009, methodology): “Barro and Sahasakul report that marginal tax rates on labor income did not move between 1975 and 1994, as does Prescott (2003).”
The Cyclical Behavior of Equilibrium Unemployment and Vacancies Revisited (2008, methodology): “VOL. 98 NO. 4 1695HAgEdORN ANd MANOVskii: UNEMpLOyMENt ANd VAcANciEs standard deviation of 0.013 for the HP-filtered (Edward Prescott 1986) productivity process with a smoothing parameter of 1,600.”
Optimal Dynamic Carbon Taxes in a Climate–Economy Model with Distortionary Fiscal Policy (2019, methodology): “Prescott (2004) uses an adjustment factor of 1.6 to transform average non-social security labor income tax rates to marginal rates for G-7 countries.”