Marketization of household production and the EU-US gap in work

Economic Policy

Volumn , Issue 41, 2005, Pages 6-50

  Freeman, Richard B ^a   Schettkat, Ronald ^b  

^a LONDON SCHOOL OF ECONOMICS   (United Kingdom)

^b UNIVERSITY OF WUPPERTAL   (Germany)

Author keywords

[No Author keywords available]

Indexed keywords

EMPLOYMENT; INTERNATIONAL COMPARISON; TEMPORAL ANALYSIS; WOMENS EMPLOYMENT; WORKING CONDITIONS;

EASTERN HEMISPHERE; EURASIA; EUROPE; NORTH AMERICA; UNITED STATES; WESTERN HEMISPHERE; WORLD;

EID: 14244249877     PISSN: 02664658     EISSN: None     Source Type: Journal    
DOI: 10.1111/j.1468-0327.2005.00132.x     Document Type: Review

References (107)

1. http://europa.eu.int/comm/lisbon_strategy/reports/index_en.html
2. Nickell S. J. and B. Bell (1996) show that EU-US employment gaps are as large among skilled as among less skilled workers. Card et al. (1994), and Freeman and Schettkat (2001b) find little relation between employment and labour costs of workers by industry or occupation across countries. Increased hours worked in the US among the educated and women, whose wages rose relative to the US average, also runs counter to the rigidity story (Freeman, 2000). Evidence that changes in the US minimum bad negligible employment effects imply that low wages did not cause high employment (Card and Krueger, 1997)
3. Baker, D. et al. (2004) document the fragility of past time-series models. The 2004 OECD Employment Outlook stressed that 'the evidence of the role played by EPL on aggregate employment and unemployment rates remains mixed' (p. 81) and worried about the effects of the temporary contracts the Jobs Strategy favoured on labour market duality and insecurity. The Outlook supported 'the plausibility of the Jobs Strategy diagnosis that excessively high aggregate wages and/or wage compression have been impediments' to jobs, but admitted that 'this evidence is somewhat fragile' and that the effect of collective bargaining appears to be contingent upon other institutional and policy factors that need to be clarified to provide robust policy advice' (p. 165).
4. Among advanced OECD countries the five with the highest overall employment-population rates (Switzerland, Norway, Sweden, Denmark, the Netherlands) the female employment-population rate averaged 71% while the five countries with the lowest overall employment-population rates (Italy, Greece, Spain, Belgium and France) the female employment-population rate averaged 47%
5. We compared data from diverse sources and found that hours differed most for the US, but found similar trends even in the US case. Independent estimates of vacation and holiday time and hours worked per week from other sources also show similar cross-country patterns to the OECD figures (Bell and Freeman, 2001).
6. Consistent with this, EU data shows little difference in rates of full-time equivalent employees per adult and regular employment per adult for men but a large difference for women. In 2001, the regular male employment rate was 73.0 in the EU, while the full-time equivalent rate was 71.3. For women, the regular rate was 54.9 but the full-time equivalent rate was 46.0. (see Eu Commission, 2002) ILO data on annual hours worked also show large differences between the genders in the EU.
7. Data for Australia, Sweden, Finland require special permission from the courtries. We obtained access to the Swedish data thanks to Lennart Flood of Gothenburg University (see also Flood and Grasjoe. 1995).
8. Although the first major time-use studies of the 1960s were designed for international comparisons (Szalai et al., 1972), international comparative work on time allocation is rare.
9. We used data for the former West Germany.
10. The MTUS (http://iserhttp://www.essex.ac.uk/mtus/index.php) reports that harmonization of the educational variable was difficult. Following Freeman, R.B. and R. Schettkat (2001b) we aggregated educational attainment from the MTUS World551 data into four educational groups. These categorizations are available on request.
11. AV4 (education) included as work is very small in the 25-54 age group we are analysing.
12. Appendix C in the Web Appendix gives our scheme. Gronau, R. and D. Hamermesh (2003) discuss grouping activities by time intensity.
13. The US 1998 survey asked about one day, so there is just one-seventh the sample (165 observations) for each day in a representative week. For men, the 1998 survey shows fewer hours worked than did the 1992 survey, and many more hours of household work. Since the economy was recovering from recession, this is implausible. Because the survey has so few observations and this peculiar pattern, we use it sparingly.
14. How marketization affects wages depends on the reasons for the change in behaviour and the correlation between household productivity and market productivity among individuals.
15. Juster F.T. and F.P. Stafford (1991) review time allocation studies. Gronau, R. (1997) reviews household production models. Hallberg D. and A. Klevmarken (2003) examine parent's allocation of time to children; Alvarez, B. and D. Miles (2003) examine the distribution of homework between men and women.
16. The most widely studied factor is provision or cost of childcare, as referenced in Box 3. Jacobsen, J. and P. Kooreman (2003) is the only study we know that examines shopping hour restrictions. We do not know of studies that examined the effect of immigration on market substitutes for household goods.
17. That is, M = A + a H + b L (Equation la), where M is market time, H is household time, and L is leisure time. The closer the coefficient on leisure time is to unity, the greater is the substitution of household work for market work.
18. This equation is M = A + a H/(L + P) (Equation 1b), where L + P is the sum of leisure time and personal time.
19. That is, we estimate an equation of this form: H/(L + P = A + a M (Equation 1c).
20. Since persons will shift into market work when their market productivity increases relative to household productivity, marketization should raise income. which itself should increase market spending. We ignore such income effects.
21. We also estimated the relation between market time and the ratio of leisure time to personal time plus household time (not reported in the table) and obtained an elasticity of -0.29.
22. The unemployed report working a small number of hours due to their doing some odd jobs.
23. Ahn, N. et al.'s (2003) analysis of the Basque Country Time Budget Survey yields comparable results with a different classification of time. The difference in time spent on what they term passive and active leisure and personal care is larger between employed and unemployed men than women while the difference in domestic work is larger for women than for men, particularly among singles. They also find similar differences by gender between the employed and those of out the labour force (Table 1).
24. The smaller number of cells for females reflects absence of observations in six cases.
25. We do not use the 1998 US survey because of problems described earlier, but including this survey as the final period for the US gives results comparable to those in Figure 3. See Freeman (2003).
26. The expenditure data cannot distinguish hotels and restaurants in most countries. For countries, which distinguish the two in their data, hotels are approximately 10% of the expenditures in the combined category.
27. Looking over time we also find that the ratio of hours spent in restaurants to hours spent cooking and cleaning up at home rose substantially in Canada, the US, and UK and modestly in the Netherlands in the 1980s and 1990s.
28. Private expenditures would show little spending on childcare in countries like Sweden or France because they use state provided services.
29. To estimate OC/MC, we aggregated groups to include a key variable that affects taxation: family status. Appendix D of the Web Appendix describes our methodology and gives OC/MC ratios for one-earner couples earning 66, 100, 133 and 200% of the average production worker and for two earner couples earning the average production wage and different amounts of working time by second earners. Our estimates of OC/MC differ from simple tax rates as in Jaumotte (2003) because we adjust for dispersion of wages.
30. Examining 1970 to mid 1990s, Prescott E.C. (2004) shows that the tax rate in France and Germany rose while labour supply fell but that the tax rate in the US was constant while labour supply increased. He attributes the increased US labour supply to a decline in the marginal tax rate for the secondary earner. Household-specific tax rates for the principal and secondary earner in the OECD's Jobs Study (OECD, 1994) give a more complex story. For the US the marginal tax rate for full-time workers with an average production worker income in couples without children fell from just 44.6% in 1978 to 43.1% in 1992; while in Germany the rates declined for the APW-income couple With a full-time/ full-time work arrangement from 53.3% to 47.5%6, which should have generated a greater rise in employment in Germany. The OECD reports a 10 point decline in the marginal rate for couples with children in the US where female employment rose substantially, but both Prescott and the OECD show a sizeable rise in the tax rate in Canada while labour supply rose slightly.
31. Jaumotte's F. (2003) measure is the tax rate of second earners relative to single earners, which does not reflect OC/MC for a couple that is married, since the rate for singles is irrelevant.
32. Schettkat, R. (1989) found that the shift from joint to individual taxation in Sweden, which lowered the marginal tax rate of the second earner, did not change participation of married women significantly.
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34. Freeman, R.B. (2000, Table 4). The 1996 figure compares to 27% in 1989. Blau A. (1998) reports that the share of couples in which female to male wage ratios is 0.9 or higher rose from 23 to 37% in the period 1979 to 1994.
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