Four themes to explain the rise in hours worked in the United States

Abstract

This article examines why hours worked in the United States have risen for the last thirty years. This increase has been contrasted by Prescott and Blanchard to the European experience of falling hours worked. Four basic explanations of this divergence are combined in a reduced form model of hours worked in the United States from 1965 to 2001. The explanation that seems to fit the data best is that rising health care costs in the United States is a key explanation. Other explanations for the increase in United States average hours worked per week include a decline in marginal tax rates, a rise in income inequality coupled with a decline in real wage rates, and productivity growth. A reduced form model is estimated using four explanatory variables representing each of these four themes.

Acknowledgement

We wish to thank Pekka Sinko for thoughtful comments.