Consumption and Hours between the United States and France

Lei Fang and Fang Yang
Working Paper 2021-7
January 2021

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Abstract: We document large differences between the United States and France in allocations of consumption expenditures and time by age. Using a life-cycle model, we quantify to what extent tax and transfer programs and market and home productivity can account for the differences. We find that while labor efficiency by age and home-production productivity are crucial in accounting for the differences in the allocation of time, the consumption tax and social security are more important regarding allocation of expenditures. Adopting the U.S. consumption tax decreases welfare in France, and adopting the U.S. social security system increases welfare in France.

JEL classification: E21, E62, J22, O57, H31

Key words: consumption expenditure, home production, labor supply, fiscal policy

The authors thank Nicholas A. Wright and Kenneth A. Castellanos for providing excellent research assistance. They are grateful to seminar participants at the Federal Reserve System Brown Bag, the European Economic Association's 2020 summer meetings, and the Southern Economic Association's 2020 annual meeting or useful comments. The views expressed are those of the authors and do not necessarily reflect those of the Federal Reserve Bank of Atlanta or the Federal Reserve System.

Please address questions regarding content to Lei Fang, Research Department, Federal Reserve Bank of Atlanta, 1000 Peachtree Street NE, Atlanta, GA 30309; Fang Yang, Department of Economics, Louisiana State University, Business Education Complex, Room 2300, Baton Rouge, LA 70803-6306.

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