Staff Report 321

Why Do Americans Work So Much More Than Europeans?

Edward C. Prescott | Senior Monetary Advisor

Published November 1, 2003

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 effective marginal tax rate on labor income. The population of countries considered is that of the G-7 countries, which are 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.

Published In: Quarterly Review (Vol. 28, No. 1, July 2004, pp. 2-13)

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