DP5140 | Work and Leisure in the US and Europe: Why So Different?

Publication Date

23/07/2005

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Abstract

Americans average 25.1 working hours per person in working age per week, but the Germans average 18.6 hours. The average American works 46.2 weeks per year, while the French average 40 weeks per year. Why do western Europeans work so much less than Americans? Recent work argues that these differences result from higher European tax rates, but the vast empirical labour supply literature suggests that tax rates can explain only a small amount of the differences in hours between the US and Europe. Another popular view is that these differences are explained by long-standing European ?culture?, but Europeans worked more than Americans as late as the 1960s. In this paper, we argue that European labour market regulations, advocated by unions in declining European industries who argued ?work less, work all? explain the bulk of the difference between the US and Europe. These policies do not seem to have increased employment, but they may have had a more society-wide influence on leisure patterns because of a social multiplier where the returns to leisure increase as more people are taking longer vacations.