Different but Equal

Discussion by Alberto Alesina

May 27 2006

Impressive effort

• Ambitious paper

• Attempt at going beyond simple characterization of work, leisure, unemployment etc

• Made me think a lot even though I expected a somewhat different paper more focused on market work hours in EU versus US

Plan of the discussion

• The paper I would have written and the questions I would have tried to answer;

• What have I learned form this paper about the questions I would have asked

• Comments on what this paper accomplishes instead

The paper I would have written

• Start with what we know about hours worked in the market in US and Europe.

• Hours worked in the market decreased dramatically in Europe while they stayed pretty much the same in the US. Europeans worked more than Americans in the sixties much less today

• Review alternative theories and disputes bout facts

What do we know: current debates

• Prescott: it is all taxes, substitution effects in a standard utility function of market labor versus leisure/home labor.

• Blanchard: it is mostly income effect: European took their increased productivity in the form of leisure. Utility functions are different in the US and France (for Oliver France is Europe)

• Alesina Glaeser Sacerdote: it is mostly union imposed regulations, union contracts, labor regulation pension laws plus multiplier effects, social norms, complementarily of leisure; taxes affect only women participation

Dispute facts

• Aguiar and Hurst: Americans take much more leisure than we think: more efficiency in leisure taking and in the leisure industry

• Freeman and Shettack: Europeans simply work more at home rather than in the market, they do not take more leisure than Americans. ( Parisians work at home in August right?)

The paper I would have written

• Discuss the disputed facts

• Assess how much of the different in work hours are explained by the three theories (taxes, income effects, unions, multipliers social norms)

What have I learned from this paper about that

• Freeman and Shatatck are wrong. It is true that Europeans work a bit more at home than Americans but they also take much more leisure. I fully agree with that.

• Aguiar and Hurst: the authors do basically nothing about that paper. Very surprising because they have a rather different story but they do not bother reconciling results and approaches. This has to be done

Theories

• They do not consider Blanchard’s theory because they do not like to assume different utility functions. But why? Utility functions (i.e. culture) could be different.

• The fact that Europeans worked more than Americans in the sixties is not enough dispense of Blanchard’s view, as they claim it is.

• Income effect

• Results that Europeans work at home more than Americans at odd with a 100 per cent of Blanchard story, but I would have liked to see more testing of that. Blanchard can be right at least for 50 per cent of the US EU difference

• More later on differences in utility functions

• Prescott: there is not much in this paper that allows me to sees how much taxes mattered. Probably they did a bit but the authors do not seem that infested in looking into that

• Alesina Glaeser and Sacerdote: their emphasis on complementarities, multiple equilibria, social norms is consistent with the spirit of this paper; I would have liked to see a better link with it in particular the role of unions and labor regulations and pension laws and more empirical testing

Additional element

• Adoption of labor saving technologies in continental Europe in response to various labor regulation, constraints on wage inequality etc.

Bottom line

• I have not learned enough about my questions, but I guess the authors of this paper were interested in something else so in a sense I cannot blame them

Their paper

• Much emphasis on what people do when not at work.

• Perhaps too much emphasis.

• Why do I think that?

Data problems

• Conceptual: virtually every activity I can think of at home is partly leisure partly home production: coking, child care, reading a book vaguely related to your work, even sex.

• For different people how much a certain activity is leisure and how much is work vary tremendously. If you like cooking you do lots of it and you look like your are working. So this is not random leads to underestimation of leisure

• Measurement: do we really trust answer to time sheets?

• Forgetfulness.• How is the residual activity to add to 24

hours is computed?• Black economy: do people hide their time

worked in the black?• Men thinking that they help their wife a lot,

overestimation of housework of men.

• Do we really care that much about whether people enjoy their time cooking or reading or watching TV or having sex?

• Up to a point yes but there is too much of that in this paper, asking too much to the data. We will never be able to disentangle down to the minute how much leisure or home production people take. I think the paper gives to much of a false impression of knowing more than we can know

A few themes of the paper

• The importance of home production.

• Men and woman working the same amount

• Social norms complementarities etc.

• Working on week ends (and some anti Americanisms in the paper)

• Editorial comments

The importance of home production

• The paper is right in emphasizing this aspect and there is a lot of nice modeling about this.

• Hoverer: not enough emphasis on productivity.• If an engineer works in the market 10 hour a

week less because of taxes regulations etc and paints his garage door and a painter goes unemployed there is a huge loss of product icy for society

• Work by Lindbeck and others on the effect of welfare state in Sweden, engineers painting garage doors not to pay taxes on painters’ salaries.

• Lower market working hours are associated with higher productivity.

• Extraordinary statement in the paper that needs to be vastly toned down: we should not worry about unemployment in Europe because those who work do not work very much any way.

On the other hand…

• If in country A (call it Sweden) Ms X cares for the children of Ms Y for a pay and the other way around and in country B (call it Italy) the two women stay at home to care for children, GDP is higher in country A.

• This is an important point: perhaps we are we overestimating the GDP of Sweden relative to that of Italy. It would be nice to know by how much

Men and women working the same amount

• Interesting fact but not a extraordinary as they make it. They almost claim that we economists should reconsider everything we know about because of this fact.

• First of all: is it a fact?

• Not sure. I think it is culturally determined and men think they work much more at home than they actually do.

• With a larger sample of countries we would find out that this fact is true in rich non Latin countries only.

• This suggests, incidentally, that different preferences/ culture may be important explaining work attitude (go back to Blanchard)

• I do not find at all surprising that single man and single women work the same amount.

• They are subject to the same labor regulations, they live alone and need similar amount of times to cook etc.

• Single men like to take leisure with single women.

• Social norms are surely important but this fact alone is oversold as a proof that they are.

Social Norms Complementarities etc

• I like this part of the paper for instance the two equilibrium model, the social norms for leisure, complementarities etc.

• Paper should do more in explaining why Americans and European ended up in two different equilibria.

Anti-Americanism

• The author have a model in which the European equilibrium is pareto superior to the American one. I am sure I can write a different model (in fact Marios Angeletos and I have one) in which the two equilibria cannot be Pareto ranked.

• I am sure that if I sit down in a day in which I am particularly pro American I could write a model in which the American equilibrium Pareto dominate

• They should way tone down their claim on Pareto comparisons.

Week ends

• Why is working on week end bad?

• It shows flexibility and increase social utility.

• When stores are closed on Sundays and you can do your hereins are you better off?

• I think that there is some hidden judgment call here that needs to be eliminated.

Empirical evidence?

• Why not push forward the empirical analysis of whether Americans are unhappy about their equilibrium and Europeans are?

• Alesina Glaeser and Sacerdote did a very little piece of that but much left to do.

• Perhaps it is true that Europeans have chosen a better equilibrium but a model alone is not going to change many people's priors.

Editorial comments

• The there is too much theory and not enough testing of theories for my taste.

• I would have liked to see more discussion of related literature.

• Some statements are a bit cavalier and need to be tone down.

• Some “judgment charged” statements should be dropped.

• The paper needs a bit more structure and a clearer story line.

Conclusion

• Fascinating topic.• I wished the paper answered different questions;

I do not think it really answer the question of why Americans work more and what share of the difference can be attributed to various factors.

• Too much emphasis in dissecting how many minutes people spend doing various activities. Some of it is useful, but I think it is a bit overdone.