Tuesday, May 23, 2006

The failed model

All the European Social Model has accomplished is to create household chores.

Another myth is that Americans work more than Europeans. By now, a wealth of studies have found very little difference in work and leisure times between American and European employees, once one takes into the account the hours spent working in household production of trivial home services.

A January 2003 study from IZA-Berlin compared Americans and Germans and found that "...overall working time is very similar on both sides of the Atlantic. Americans spend more time on market work but Germans invest more in household production." According to the authors "...these differences in the allocation of time can be explained by differences in the tax-wedge and wage differentials."

The tax-wedge is a measure of tax burden that combines income tax, employment tax and consumption taxes to assess the overall effect of government levies on household income.
It goes back to the creeping growth of government justifying it’s ubiquity by getting into every business it can, and then placing a burden on the population to pay for it. As one of the least efficient spenders of the change they’ve shaked out taxpayer’s pockets, one need not be proponent of small government to see that government at a certain scale is a structural economic problem.
Conny Olovson of Stockholm University conducted a comparative analysis of the effects of tax regimes in Sweden and the US on labor market decisions by the households. The study found that while "market work per person is roughly 10% higher in the US than in Sweden, including home production on the side of work hours reduces the difference to approximately 1%". Just as before, higher labor and consumption taxes were responsible for the majority of the observed differences in the household decision to purchase or to supply home services using their own labor.
Read the whole thing by Constantin Gurdgiev here.

The fuse is lit!

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