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by: Dr. Janiya Bernier


Dr. Janiya Bernier

GPA 3.77

B. Eichengreen

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About this Document

B. Eichengreen
Class Notes
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This 15 page Class Notes was uploaded by Dr. Janiya Bernier on Thursday October 22, 2015. The Class Notes belongs to ECON 183 at University of California - Berkeley taught by B. Eichengreen in Fall. Since its upload, it has received 35 views. For similar materials see /class/226707/econ-183-university-of-california-berkeley in Economcs at University of California - Berkeley.




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Date Created: 10/22/15
GDP per capita 40000 4 35000 4 30000 4 25000 4 US EU15 20000 4 15000 4 10000 4 5000 4 0 1 1 1 1 1 1 1 1 1970 1975 1980 1985 1990 1995 2000 2004 Data from OECD factbook 2006 Does America have something that Europe is missing American excetionalism vs the European model Two factors that determine GDP per capita Labor productivity output per hour worked Increased in Europe relative to the US between 1970 and 1995 Decreased in Europe relative to the US from 1995 and onward Hours of work in the labor market Has been decreasing since 1970 The future result of a combination of low productivity and less hours of work Part 1 What can explain the evolution of hours of work from 1970 to 1995 Prescott 2004 Rogers 2007 and Alesina Glaeser amp Sacerdote 2005 Part 2 Why has Europe lost in productivity relative to the US from 1995 Gordon 2004 9 What does Europe have to do Part 3 Go Europe Blanchard 2004 Part 1 Possible determinants of the decrease in number of hours worked Productivity and the number of hours worked 1970 1995 31110 1 PPP GDP 110139 lj l ll PPP GDP 1191 hmtr and Hmurs 11431quot pnrsnn 1970 and Q UJEL BLT 15 and France TE139JUI GDP per 13915011 GDP per 113111 Hours per person 19TH 3000 19m MUD 1970 ZEICJICIEI US 10139 HID 1C 13930 1m IUD ELI 15 69 m 65 91 101 77 France T T T 185i 99 iii Llama EU Amen dam haw From Blanchard 2004 p 4 Seaman Denmark Frame e I t r39 Sweden United States From Alesina et a 2005 p46 Annual week walked Breakduwu of 5139 Weeks into Weeks quotWorked Huh ay and Vamtmn Weeks and Either Leave He Md fw and mea ea weeka cq qmm lquotF r rJ D 13 PP Pan week absentee due rte nun he iday holiday tea30113 reasem 1 8 39339 3 W 1 m Fullweek ab aences due M 11011 Absence clue to sickneas S maternity Working for vacation The decrease in hours of work is due to cultural factors Europeans like vacation and Americans are workoholics Labor market policies that decrease the incentives to work Taxes Union policies TAXES Income tax payroll tax consumption tax effective marginal tax rate Individual chooses between working in the labor market and leisure encompasses nonmarket sector The tax creates a wedge between income from labor market work and income from the nonlabor market sector distortion From 1970 to 2000 the tax rate in Europe increased by 1015 in Europe compared to about 8 in the US Blanchard 2004 p 9 Union Policies Higher wage Negotiate more vacation andor shorter work week Negotiation of generous pension schemes Negotiation of unemployment compensation Prescott 2004 and European taxes Looks at the labor supplies in the G7 over time The tax rate accounts for the whole difference in hours of work Jolly good In order to catch up Europe just have to lower the taxes Rogers 2007 It is the service sector An alternative view on the importance of high taxes Kuznets Agriculture 9 Manufacture and services 9 ervices As Europe catches up with America the employment rate across sectors expected to be roughly the same In 2000 the employment in the European service sector was 70 of that in the US In order to understand the difference in hours of work one must understand why Europe has not developed a market service sector similar to that of the US


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