The Leisure Gains from International Trade
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Summary:
The average number of hours worked has been declining in many countries. This can be explained if workers have preferences with income effects outweighing substitution effects. Then, an optimal response to rising income is to reduce labor supply to enjoy more leisure. In this paper, I develop a novel structural link between trade and aggregate labor supply. Using a multi-country Ricardian trade model, I show that reducing trade barriers leads to fewer hours worked while being compatible with an increase in welfare. In addition, I derive an hours-to-trade elasticity and estimate it by exploiting exogenous income variation generated by aggregate trade. On average, I quantify that the rise in trade openness between 1950 and 2014 explains 7 percent of the total decline in hours per worker in high-income countries.
Series:
Working Paper No. 2024/016
Subject:
Consumption Employment rate Income Labor Labor supply National accounts Real wages
Frequency:
regular
English
Publication Date:
January 19, 2024
ISBN/ISSN:
9798400265082/1018-5941
Stock No:
WPIEA2024016
Format:
Paper
Pages:
66
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