Lectures in Macroeconomics- Charles W. Upton Why Americans Work Harder.

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Presentation transcript:

Lectures in Macroeconomics- Charles W. Upton Why Americans Work Harder

GDP and Hours Worked, G7

Why Americans Work Harder GDP and Hours Worked, G7

Why Americans Work Harder GDP and Hours Worked, G7 GDP Figures are OECD Purchasing Power Parity Data are figures

Why Americans Work Harder Data

Why Americans Work Harder Data Why the differences? And why the changes?

Why Americans Work Harder Data Why the differences? And why the changes? Lets look at a model by Edward Prescott

Why Americans Work Harder Utility in the Prescott Model

Why Americans Work Harder The Immortal Consumer

Why Americans Work Harder Allowing for Leisure

Why Americans Work Harder The Final Equation

Why Americans Work Harder Optimization

Why Americans Work Harder Optimization

Why Americans Work Harder Optimization

Why Americans Work Harder Optimization

Why Americans Work Harder Optimization

Why Americans Work Harder Optimization

Why Americans Work Harder The Production Function

Why Americans Work Harder The Tax on Consumption and Wages

Why Americans Work Harder Hours Worked

Why Americans Work Harder Hours Worked The higher the value of leisure (i.e., the higher the value of θ) the fewer hours worked

Why Americans Work Harder Hours Worked The higher the value of leisure (i.e., the higher the value of θ) the fewer hours worked The higher the tax rate (i.e., the higher the value of τ) the fewer hours worked

Why Americans Work Harder Fitting the Model Country Tax rate τ c/yActualPredicted Germany France Italy Canada United Kingdom Japan United States

Why Americans Work Harder Fitting the Model Country Tax rate τ c/yActualPredicted Germany France Italy Canada United Kingdom Japan United States The differences are consistent with the tax rates. Moreover, the change is consistent with changes in tax rates.

Why Americans Work Harder Are Europeans Better Off? D S SR S LR H* w* HτHτ Some argue that Europeans are better off. They get less income but more leisure.

Why Americans Work Harder Are Europeans Better Off? D S SR S LR H* w* HτHτ Some argue that Europeans are better off. They get less income but more leisure. Any tax involves an efficiency loss.

Why Americans Work Harder Are Europeans Better Off? D S SR S LR H* w* HτHτ US France

Why Americans Work Harder Are Europeans Better Off? D S SR S LR H* w* HτHτ US France Prescott estimates that if France reduced its taxes to US rates, it would amount to a 19% gain in consumption

Why Americans Work Harder End ©2004 Charles W. Upton. All rights reserved