DP5440 Trends in Hours and Economic Growth

Author(s): Liwa Rachel Ngai, Christopher Pissarides
Publication Date: December 2005
Keyword(s): balanced growth, home production, hours of work, labour supply, marketization, structural transformation
JEL(s): J21, J22, O14, O41
Programme Areas: International Macroeconomics
Link to this Page: www.cepr.org/active/publications/discussion_papers/dp.php?dpno=5440

We study long-run trends in aggregate market hours of work and shifts across economic sectors within the context of balanced aggregate growth. We show that a model of many goods and uneven TFP growth in market and home production can rationalize the observed falling or U-shaped aggregate hours and structural change across market sectors. The dynamics of market hours are driven by substitutions between home and market production and depend critically on the existence of many market sectors. Extensions show how the model can explain rising leisure and more complex hours dynamics without violating balanced aggregate growth.