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Labor Supply and Taxation$
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Richard Blundell, Andreas Peichl, and Klaus F. Zimmermann

Print publication date: 2016

Print ISBN-13: 9780198749806

Published to Oxford Scholarship Online: June 2016

DOI: 10.1093/acprof:oso/9780198749806.001.0001

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PRINTED FROM OXFORD SCHOLARSHIP ONLINE (oxford.universitypressscholarship.com). (c) Copyright Oxford University Press, 2021. All Rights Reserved. An individual user may print out a PDF of a single chapter of a monograph in OSO for personal use. date: 04 August 2021

Labour Supply and the Extensive Margin

Labour Supply and the Extensive Margin

(p.55) 2 Labour Supply and the Extensive Margin
Labor Supply and Taxation

Richard Blundell

Antoine Bozio

Guy Laroque

Oxford University Press

This chapter proposes a systematic way of examining the importance of the extensive and the intensive margins of labour supply in order to explain the overall movements in total hours of work over time. This analysis is applied to the evolution of labour practices in the USA, UK, and France, and shows that both the extensive and intensive margins matter in explaining changes in total hours. The chapter pays close attention to Edward Prescott’s article ‘Why Do Americans Work So Much More than Europeans?’, where he argues that the responsiveness of the extensive margin of labour supply to taxation plays a major role in explaining aggregate differences in total hours worked across countries. These differences show that an economy with fixed technology costs for firms and an inverted U-shape life cycle productivity for workers can produce large aggregate extensive labour supply responses driven by movements in employment at either end of the working life.

Keywords:   intensive margins, labour supply, work, labour practices, Edward Prescott, labour supply, taxation, fixed technology costs

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