Alexander Bick, an associate professor of economics at Arizona State University (currently on leave), joined the Federal Reserve Bank of Minneapolis as a research economist in 2019. He holds a master’s degree and Ph.D. in economics from Goethe University Frankfurt in Germany.
Alex’s current research focuses on documenting and understanding cross-country differences in labor supply, specifically between Europe and the United States. His research has been published in various journals, including the American Economic Review and the Review of Economic Studies, and has been covered by national and international media outlets such as Bloomberg.
We use national labor force surveys from 1983 to 2015 to construct hours worked per person on the aggregate level and for different demographic groups for 18 European countries and the United States. We apply a harmonization procedure to measure hours worked consistently across countries and over time. In the recent cross‐section, Europeans work 14 percent fewer hours than US Americans. Differences in weeks worked and in the educational composition each account for one quarter to one half of this gap. In addition, lower hours worked per person than in the United States are driven by lower weekly hours worked in Scandinavia and Western Europe, but by lower employment rates in Eastern and Southern Europe.
We document the time-series of employment rates and hours worked per employed by married couples in the US and seven European countries (Belgium, France, Germany, Italy, the Netherlands, Portugal, and the UK) from the early 1980s through 2016. Relying on a model of joint household labor supply decisions, we quantitatively analyze the role of non-linear labor income taxes for explaining the evolution of hours worked of married couples over time, using as inputs the full country- and year-specific statutory labor income tax codes. We further evaluate the role of consumption taxes, gender and educational wage premia, and the educational composition. The model is quite successful in replicating the time series behavior of hours worked per employed married woman, with labor income taxes being the key driving force. It does however capture only part of the secular increase in married women’s employment rates in the 1980s and early 1990s, suggesting an important role for factors not considered in this paper. An independent and important contribution of the paper is that we make the non-linear tax codes used as an input into the analysis available as a user-friendly and easily integrable set of Matlab codes.
In this article, we document that the Organisation for Economic Co-operation and Development (OECD) and the Conference Board’s Total Economy Database (TED) have substantially revised their measures of hours worked over time. Relying on the data used by Rogerson (2006) and Ohanian et al. (2008), we find that, for 2003, hours worked per person in Europe is 18 percent lower than hours worked in the United States. Using the 2016 releases of the same data for 2003 yields a gap that is 40 percent smaller—that is, only 11 percent lower. Using labor force survey data, which are less subject to data revisions, we find a Europe-U.S. hours gap of –19 percent.
We document contemporaneous differences in the aggregate labour supply of married couples across seventeen European countries and the U.S. Based on a model of joint household decision making, we quantify the contribution of international differences in non-linear labour income taxes and consumption taxes to the international differences in hours worked in the data. Through the lens of the model, taxes, together with wages and the educational composition, account for a significant part of the small differences in married men’s and the large differences in married women’s hours worked in the data. Taking the full non-linearities of labour income tax codes, including the tax treatment of married couples, into account is crucial for generating the low cross-country correlation between married men’s and women’s hours worked in the data, and for explaining the variation of married women’s hours worked across European countries.
This paper builds a new internationally comparable database of hours worked to measure how hours vary with income across and within countries. We document that average hours worked per adult are substantially higher in low-income countries than in high-income countries. The pattern of decreasing hours with aggregate income holds for both men and women, for adults of all ages and education levels, and along both the extensive and intensive margin. Within countries, hours worked per worker are also decreasing in the individual wage for most countries, though in the richest countries, hours worked are flat or increasing in the wage. One implication of our findings is that aggregate productivity and welfare differences across countries are larger than currently thought.
We quantify the disincentive effects of elements of joint taxation in the labor income tax codes of 17 European countries and the US. We analyze the extent to which hours worked of married men and women would change if each country switched to a system of separate taxation of married couples. In this hypothetical tax reform, we keep the average tax burden of married households constant. With the exception of four countries featuring already a system of separate taxation, the model predicts that married women’s hours worked increase on average by 115 hours, or 10.5 percent, through this reform.
I document that the labor force participation rate of West German mothers with children aged zero to two exceeds the corresponding child‐care enrollment rate, while the opposite is true for mothers whose children are older than two but below the mandatory schooling age. These facts also hold for a cross‐section of E.U. countries. I develop a life‐cycle model that explicitly accounts for this age‐dependent relationship by including various types of nonpaid and paid child care. I calibrate this model to data for West Germany and use the calibrated model for policy analysis. Increasing the supply of subsidized child care for children aged zero to two generates an increase in the maternal labor force participation rate consistent with empirical evidence from other settings; however, this increase is too small to conclude that the lack of subsidized child care accounts for the low labor force participation rate of mothers with children aged zero to two. The response along the intensive margin suggests that a large fraction of part‐time working mothers would work full‐time if they had greater access to subsidized child care. Finally, making subsidized child care available to more women does not achieve one of the commonly stated goals of such reforms, namely to increase the fertility rate.
Although the link between household size and consumption has strong empirical support, there is no consistent way in which demographics are dealt with in standard life-cycle models. We study the relationship between the predictions of the Single Agent model (the standard in the literature) versus a simple model extension (the Demographics model) where deterministic changes in household size and composition affect optimal consumption decisions. We show theoretically that the Demographics model is conceptually preferable to the Single Agent model as it captures economic mechanisms ignored by the latter. However, our quantitative analysis demonstrates that differences in predictions for consumption are negligible across models, when using standard calibration strategies. This suggests that it is largely irrelevant which model specification is used.
We introduce a dynamic panel threshold model to estimate inflation thresholds for long-term economic growth. Advancing on Hansen (J Econom 93:345–368, 1999) and Caner and Hansen (Econom Theory 20:813–843, 2004), our model allows the estimation of threshold effects with panel data even in case of endogenous regressors. The empirical analysis is based on a large panel-dataset including 124 countries. For industrialized countries, our results confirm the inflation targets of about 2% set by many central banks. For non-industrialized countries, we estimate that inflation rates exceeding 17% are associated with lower economic growth. Below this threshold, however, the correlation remains insignificant.
This paper introduces a generalized panel threshold model by allowing for regime intercepts. The empirical application to the relation between inflation and growth confirms that the omitted variable bias of standard panel threshold models can be statistically and economically significant.
The impact of inflation on relative price variability (RPV) is an important channel for real effects of inflation. With a view to the recent debate on the Federal Reserve’s implicit lower and upper bounds of its inflation objective, we introduce a modified version of Hansen’s panel threshold model to explore the inflation-RPV linkage in U.S. cities. We find two significant inflation thresholds and both positive and negative effects of inflation on RPV. The smallest effect of inflation on RPV is ensured if inflation is low but well above zero. If monetary policy aims at minimizing inflation’s impact on relative prices, our estimates suggest that U.S. inflation should range between 1.8 percent and 2.8 percent.