The Leisure Gains from International Trade

The Leisure Gains from International Trade
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Volume/Issue: Volume 2024 Issue 016
Publication date: January 2024
ISBN: 9798400265082
$20.00
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Topics covered in this book

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Labor , Economics- Macroeconomics , Economics / General , Hours worked , leisure , labor supply , Marshallian elasticity , uncompensated elasticity , international trade , Ricardian trade model , trade share , trade openness , hours-to-trade elasticity , Income , Real wages , Employment rate , Consumption , Global

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.