Abstract
The authors develop and calibrate a theoretical model that explains per capita hours worked and output growth as a function of three fiscal policy variables. Differences in income taxes, productive government expenditures, and non employment transfers are sufficient to answer the question why Europeans work (much) less than Americans and why some Europeans work less than others. Differences in taste for leisure have little role to play given the actual variation of these three policy variables.
Hazel's comment: Tax workers too much and they will not work such long hours that additional tax becomes payable. It is human nature to want to see reward for one's labour whether this is expressed as "more money in the pay packet" or is visible as beneficial government spending with the revenue collected.
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