Publications

Based on novel survey data, we document a persistent rise in work from home (WFH) over the course of the COVID-19 pandemic. Using theory and direct survey evidence, we argue that three quarters of this increase reflects adoption of new work arrangements that will likely be permanent for many workers. A quantitative model matched to survey data predicts that twice as many workers will WFH full-time post-pandemic compared to pre-pandemic, and that one in every five instead of seven workdays will be WFH. These model predictions are consistent with survey evidence on workers’ own expectations about WFH in the future. 

Economists have recently begun using independent online surveys to collect national labor market data. Questions remain over the quality of such data. This paper provides an approach to address these concerns. Our case study is the Real-Time Population Survey (RPS), a novel online survey of the US built around the Current Population Survey (CPS).  The RPS replicates core components of the CPS, ensuring comparable measures that allow us to weight and rigorously validate our results using a high-quality benchmark. At the same time, special questions in the RPS yield novel information regarding employer reallocation during the COVID-19 pandemic. We estimate that 26% of pre-pandemic workers were working for a new employer one year into the COVID-19 outbreak in the US, at least double the rate of any previous episode in the past quarter century. Our discussion contains practical suggestions for the design of novel labor market surveys and highlights other promising applications of our methodology.

We argue that hours per worker are at least as important as employment rates when it comes to projecting future labor market trends and potential output. Based on data for 18 European countries and the US over the two decades prior to the COVID-19 pandemic, we document that hours worked per person fell in most countries, driven by a uniform decline in hours per worker. By contrast, employment rates increased in most countries. We present a stylized model in which a decrease in the fixed costs of working rationalizes the pattern of decreasing hours per worker and increasing employment rates. Although the COVID-19 pandemic increased the fixed costs of working in the short run, recent survey evidence from the US suggests that changing work arrangements since the pandemic had the opposite effect and are likely to persist into the future.

This paper studies how structural change in labor supply along the development spectrum shapes cross-country differences in hours worked. We emphasize two main forces: sectoral reallocation from self-employment to wage work, and declining fixed costs of wage work. We show that these forces are crucial for understanding how the extensive margin (the employment rate) and intensive margin (hours per worker) of aggregate hours worked vary with income per capita. To do so we build and estimate a quantitative model of labor supply featuring a traditional self-employment sector and a modern wage-employment sector. When estimated to match cross-country data, the model predicts that sectoral reallocation explains more than half of the total hours decrease at lower levels of development. Declining fixed costs drive the rise in employment rates at higher levels of income per capita, and imply higher hours in the future, in contrast to the lower hours resulting from income effects and expansions in tax-and-transfer systems.

We document two robust features of the cross-sectional distribution of usual weekly hours and hourly wages. First, usual weekly hours are heavily concentrated around 40 hours, while at the same time a substantial share of total hours come from individuals who work more than 50 hours. Second, mean hourly wages are non-monotonic across the usual hours distribution, with a peak at 50 hours. We develop and estimate a model of labor supply to account for these features. The novel feature of our model is that earnings are non-linear in hours, with the extent of nonlinearity varying over the hours distribution. Our estimates imply significant wage penalties for individuals that deviate from 40 hours in either direction, leading to a large mass of individuals that work 40 hours and are not very responsive to shocks. This has important implications for the role of labor supply as a mechanism for self-insurance in a standard heterogeneous agent-incomplete markets model and for empirical strategies designed to estimate labor supply parameters.

We use national labor force surveys from 1983 through 2015 to construct hours worked per person on the aggregate level and for different demographic groups for 18 European countries and the US. We apply a harmonization procedure to tackle the two main challenges for mea- suring hours worked consistently across countries and over time from labor force surveys. In the recent cross-section, Europeans work 14% 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. Lower hours per person than in the US are in addition 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 sub- ject to data revisions, we find a Europe-U.S. hours gap of –19 percent.

We document contemporaneous differences in the aggregate labor supply of married couples across 17 European countries and the US. Based on a model of joint household decision making, we quantify the contribution of international differences in non-linear labor 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 labor 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 coun- tries. 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 by analyzing 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, keeping government revenues and thus average tax burdens of married households unchanged.

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 EU countries. I develop a life-cycle model that explicitly accounts for this age-dependent relationship by including various types of non-paid 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 does suggest 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 thresh- olds for long-term economic growth. Advancing on Hansen (1999) and Caner and Hansen (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-data set 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 mon- etary 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.