Why Do People Work So Hard?

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May 2018
Paper author(s): 
Paul Scanlon
Topic: 
Labor
Year: 
2018

Labor hours tend to fall as an economy develops, but subsequently tend to stabilize. I present a model which explains long-run trends in labor supply by the interaction of two opposing forces: a rising real wage, which lowers labor supply, and increasing product variety, which raises it. Both forces arise from the same source—innovation—and on a balanced growth path their interaction can sustain stable labor hours. Calibrating the model over the period 1959-1999, it can explain on average 80 percent of the discrepancy between hours predicted by the standard CIES one-good model and the data.

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