- The Leisure Gains from International Trade (Job Market Paper)
Abstract: The number of hours worked has been slowly declining in many countries since 1950. In this paper, I show that trade has contributed to this trend by raising workers' income and leisure time. Building on a multicountry Ricardian trade model, I develop a structural relationship between the equilibrium number of hours worked and the domestic trade share. Lower trade barriers reduce domestic consumption prices through cheaper imports, generating positive income effects. Households react to the increased income by sacrificing a small share of higher consumption to enjoy more leisure time. The number of leisure hours generated by trade depends only on the domestic trade share and three parameters: the elasticity of hours worked to real wages, the capital share, and the trade elasticity. I estimate these parameters in a country-year panel. For identification I use the development of air transportation technology as an exogenous shifter of trade costs. Across countries, I estimate that trade is providing annually between 35 and 170 hours of leisure per worker. On average, the increase in trade openness explains 18% of the total decline in hours worked between 1950 and 2014.
- Sectoral Technology and the Decline of the Labor Share (slides) Draft coming soon!
Abstract: Most sectors in the US have observed a decline of the labor share in the past four decades. While some researchers argue that this was a consequence of technological innovations, others suggest it was due to a rise of market power. In this paper, I investigate the importance of each of these narratives in explaining the aggregate decline of the labor share. To this aim, I analyze the heterogeneous trends in factor shares between manufacturing sectors, which saw an abrupt decline in labor shares, and services sectors, which remained stable. I estimate the production function for 35 sectors across time, including time-varying markups. By building sectoral factor shares based on the estimated production functions, I assess the contribution of each narrative by comparing how well they track the decline of the observed labor shares in each sector, and at the aggregate level. My findings suggest that the rise in market power can explain most of the labor share decline in manufacturing and the aggregate economy, while technical change counterbalances this effect in services.
- How Does Taxation Affect Hours Worked in EU New Member States? (with Svetlana Vtyurina)
Abstract: Hours worked vary widely across countries and over time. In this paper, we investigate the role played by taxation in explaining these differences for EU New Member States. By extending a standard growth model with novel data on consumption and labor taxes, we assess the evolution of trends in hours worked over the 1995-2017 period. We find that the inclusion of tax rates in the model significantly improves the tracking of hours. We also estimate the elasticity of hours (and its different margins) to quantify the deadweight loss introduced by consumption and labor taxes. We find that these taxes explain a large share of labor supply differences across EU New Member States and that the potential gains from policy actions are noteworthy.
Work in Progress
Trade and Labor Supply in Developing Countries (with Nicolás Depetris-Chauvin)
Productivity or Policies? Explaining Cross-Country Differences in Hours Worked