A Note on Data Revisions of Aggregate Hours Worked Series: Implications for the Europe-US Hours Gap Alexander Bick Arizona State University Bettina Brüggemann McMaster University Nicola Fuchs-Schündeln Goethe University Frankfurt, CEPR and CFS March 29, 2017 Abstract In this note we document that the OECD and the Conference Board s Total Economy Database substantially revised their measures of hours worked over time. Relying on the data used by Rogerson (2006) and Ohanian et al. (2008), we find a Europe-US hours per person gap of -18% for the year 2003. Using the most recent releases of the same data yields for the year 2003 a gap that is 40% smaller, namely a gap of only -11%. Using labor force survey data, which are less subject to data revisions, we find a Europe-US hours gap of -19%. Email: alexander.bick@asu.edu, brueggeb@mcmaster.ca and fuchs@wiwi.uni-frankfurt.de. We thank Valerie Ramey for helpful comments and encouraging us to write this note. The authors gratefully acknowledge financial support from the Cluster of Excellence Formation of Normative Orders at Goethe University and the European Research Council under Starting Grant No. 262116. All errors are ours.
1 Introduction Rogerson (2006) documents large differences in hours worked per person among OECD countries for the early 2000s. Specifically, based on data from the OECD and the Total Economy Database (TED), he finds that hours worked per person in the 16 European countries in his sample are substantially lower than in the US. In this note, we show that using the most recent releases of the same data yields a Europe-US hours worked per person gap that is about 40% smaller than the one he found. Since the data used by Rogerson (2006) were not published along with his study, we replicate his results using the data from his companion paper with Ohanian and Raffo (Ohanian et al., 2008) available on the website of the Journal of Monetary Economics. The implied Europe-US hours worked per person gap is -17.6% for the year 2003, the latest available year in their data set. Using the most recent release of the same data yields for the year 2003 a gap of only -11.0%, thus 37.5% lower. We document that these drastically different results mainly originate from revisions of the hours worked per employed series used in the calculation of hours worked per person. Next to Rogerson (2006) and Ohanian et al. (2008), the implied Europe-US hours per person gaps in Prescott (2004) and McDaniel (2011) are also subject to such revisions. 1 Using labor force survey data, which are less subject to data revisions, we find a Europe-US hours gap of -19%. We further show that the different formulas used to calculate hours worked per person in these papers only have negligible effects on the estimated Europe-US hours per person gap. 2 Literature Overview In this section we provide a brief overview of how hours worked per person have been calculated in the literature and which data sources have been used. The upper panel of Table 1a lists the main papers explaining hours worked differences between a large set of European countries and the US. Column 2 states the formula used in each paper to calculate hours worked per person, while column 3 lists the respective time period covered. The first four papers calculate hours worked per person by multiplying average hours worked per employed with various measures of the civilian employment to population ratio. The first three papers calculate the latter as civilian employment without an age limit over the population aged 15 to 64, with Prescott (2004) also including non-civilian employment. Ragan (2013) restricts the employment to population ratio to the age group 25 to 64. Henceforth, we use the term employment rate interchangeably for these employment to population ratios. McDaniel (2011) differs from these papers by directly dividing total hours worked by the population aged 15 to 64. We exclude Alesina et al. (2005), and Faggio and Nickell (2007) from Table 1 because their measure of hours worked per employed are based on data published in a special section of the OECD s Economic Outlook 2004. These data are not part of the OECD s general database and are as such not subject to their usual maintenance and revisions. Moreover, their measure of hours worked per employed was obtained from labor force surveys, which are usually not subject to larger 1 Ragan (2013) is an exception. While the underlying data used by her were subject to non-negligible revisions on the country level, the average Europe-US hours gap is nearly left unchanged. 1
Table 1: Overview of the Macro Literature on Cross-Country Differences in Hours Worked per Person (a) Hours Worked per Person Formulas and Time Period Covered Reference Hours Worked per Person Period Prescott (2004) Avg. Hours per Employed Rogerson (2006) Avg. Hours per Employed Ohanian et al. (2008) Avg. Hours per Employed Ragan (2013) Avg. Hours per Employed McDaniel (2011) Civilian + Non-civilian Empl. Population 15-64 Avg. 1970-73 & 1993-96 Civilian Employment Population 15-64 2003 Civilian Employment Population 15-64 1956-2004 Civilian Employment 25-64 Population 25-64 Avg. 1998-2003 Total Hours Population 15-64 1960-2004 Bick et al. (2017) NIPA LFS Total Hours Total Employment Civilian Hours Civilian Employment Total Employment Population 15-64 1983-2015 Civilian Employment Civilian Population 15-64 (b) Data Sources Reference Hours Employment Population Prescott (2004) OECD Labour Database - Labour Force Statistics Rogerson (2006) TED OECD Labor Market Database Statistics Ohanian et al. (2008) TED [2008] Ragan (2013) Various issues of the OECD s Economic Outlook and Main Economic Indicators OECD Labor Market Statistics McDaniel (2011) TED [2007] OECD Bick et al. (2017) NIPA (OECD) OECD NA Database [2016] OECD ALFS [2016] NIPA (TED) TED [2016] OECD ALFS [2016] LFS National Labor Force Surveys [2016] OECD National Accounts Database; OECD Labour Database - Labour Force Statistics - Annual Labour Force Statistics 2
revisions. In Bick et al. (2017) we construct internationally comparable hours worked measures for the US and 18 European countries on a more disaggregate level, e.g. by gender and education, using national labor force surveys (LFS). Such detailed measures of hours worked have not been available so far. In Bick et al. (2017) we discuss in detail the strategy how we achieve comparability of hours worked across countries and over time, a task far from trivial. 2 We also contrast the aggregate hours implied by the LFS data with those from the National Income and Product Accounts (NIPA). For both types of data sources, we use conceptually the same formula, see the lower panel of Table 1a. Here, we intentionally use the product formulation, i.e. hours per employed times the respective employment to population ratio, because it highlights that in our calculation employment cancels out, as in McDaniel (2011). For the first four studies listed in Table 1a this is not necessarily the case. We do not know whether the denominator in average hours per employed referred to total or civilian employment in older releases of the data. Thus, it may or may not be equal to the numerator in the respective employment to population ratio. We elaborate on this further below. The upper panel of Table 1b states the data sources exactly as specified in each of the five papers. Numbers in parentheses refer to the year of the publication of each paper, whereas numbers in brackets refer to the year of the data release if provided by the authors in the respective paper. Employment and population figures are always taken from the OECD, while average hours worked per employed are either from the OECD or from different releases of the Total Economy Database (TED), which in earlier years was maintained jointly by the Conference Board and the Groningen Growth and Development Centre. The lower panel of Table 1b states the data sources used in Bick et al. (2017). We report here two NIPA measures, which only differ in their source for hours per employed. We take total hours and total employment either from the OECD s National Accounts Database, downloaded in March 2016, or from the May 2016 TED release. We denote both measures by NIPA because for most years and countries both data sources report exactly the same numbers. We normalize both NIPA measures with the population aged 15 to 64 from the OECD s Annual Labor Force Statistics, downloaded as well in August 2016. The calculation of our LFS measure of hours worked per person uses for hours worked, employment, and the population only information from the national labor force surveys. 3 We downloaded CPS data for the US in August 2016 from the NBER s web page, and use the ELFS as provided to us by Eurostat in 2014. The LFS also undergo revisions, but these are minor revisions concentrated on certain quarters and countries, and only for a few variables at a time. 4 2 Hours per employed and weeks worked in the OECD Economic Outlook 2004, which is used by Alesina et al. (2005), and Faggio and Nickell (2007) are constructed in a similar way as those in Bick et al. (2017). Both approaches are based on national labor force surveys, and use external data sources for annual leave and public holidays to estimate weeks worked per year. The key difference lies in the treatment of weekly hours lost (relative to usual hours worked) for reasons other than annual leave and public holidays. In our approach these reduce weekly hours worked per employed but do not affect weeks worked per year, whereas in the OECD Economic Outlook 2004 it is the other way around. 3 To ensure the comparability across countries and over time, we need to make an adjustment using external data sources for public holidays and annual leave to overcome differences in the sets of weeks sampled across countries and over time. For details, we refer the reader to Bick et al. (2017). 4 The first draft of this note was written in August 2016. Since then both the OECD and TED have updated their data. There 3
Both the OECD and TED also report average hours worked per employed as a separate variable, which are used in the papers by Prescott (2004), Rogerson (2006), Ohanian et al. (2008), and Ragan (2013). For the TED, this is simply total hours worked divided by total employment from the TED. The OECD s average annual hours worked per employed series can be found in the OECD s Labour Database under the category Labour Force Statistics. Similarly to the TED, this estimate is equal to total hours worked divided by total employment from the OECD s National Account Database, although there are small differences for few countries in some years. We are not entirely sure whether in earlier releases of the data hours worked per employed were similarly calculated as total hours divided by total employment; in the Septemter 2006 release of the TED hours worked per employed are defined as total hours divided by persons engaged. In our analysis of the effects of data revisions, we draw for civilian employment on data from the OECD s Labour database under the section Labour Force Statistics. Two data series are available: one under the category LFS by sex and age (LFSsa) and one under the category Annual Labour Force Statistics (ALFS). As we show further below, the differences between LFSsa and ALFS employment are small for most countries. The difference with total employment from NIPA data is however non-negligible for both series. Hence at least for the most recent release of the data, employment does not cancel out in the formulas used by the first four papers in Table 1a. We come to this conclusion because average hours worked per employed directly available from the OECD and TED are largely based on total hours and total employment, as discussed above. If we add non-civilian employment, which is available for a subset of countries in the Annual Labour Force Statistics, to civilian employment from LFSsa or ALFS, we do not arrive at total employment from NIPA, such that for the formula used by Prescott (2004) employment does not cancel out either. 3 Evaluating Differences in Labor Supply Measures Originating from Different Data Releases In this section, we evaluate the role of revisions between different data releases for the measurement of hours worked based on OECD and TED data. Since the data used by Rogerson (2006) for the year 2003 were not published along with his study, we conduct our comparison based on the data used in his companion paper with Ohanian and Raffo (Ohanian et al. (2008)). These are available on the website of the Journal of Monetary Economics. Note that Ohanian et al. (2008) focus only on the cross-country comparisons of trends. Therefore, in principle our study relates to the paper by Rogerson (2006), but we use the data from Ohanian et al. (2008) for the analysis. 5 We restrict our attention to the US and the set of 15 European countries which are part of the Ohanian et al. (2008) and part of the Bick et al. (2017) sample. 6 We report were no major revisions in those releases relative to the data available in August 2016. Hence, we still refer to the data used as the Current release even though they are not the most current any longer. 5 Using the data from Ohanian et al. (2008) for the year 2003 yields the same results as presented in Table 1 in Rogerson (2006). 6 We drop Finland from the Ohanian et al. (2008) sample, and the Czech Republic, Hungary and Poland from the Bick et al. (2017) sample. 4
Table 2: Employment Rate and Avg. Annual Hours per Employed Differences for the Year 2003 Employment Rate Avg. Hours per Employed Country e ORR ALFS, 2016 Rel. LFSsa, 2016 Rel. HORR E 2006 Rel. 2011 Rel. 2013 Rel. 2016 Rel. Austria 68.7 0.4 0.1 1498.5 1.1 15.3 18.5 19.0 Belgium 58.6 2.1 2.1 1618.9 0.0 2.7 2.7 2.5 Denmark 74.6 1.4 1.5 1519.0 2.1 2.2 2.2 2.5 France 62.5 3.3 0.8 1428.6 0.2 7.3 3.1 3.9 Germany 63.2 2.4 3.0 1441.4 0.2 0.2 0.4 1.2 Greece 59.7 1.1 1.4 1929.0 0.0 9.0 9.0 8.4 Ireland 66.0 0.5 0.9 1652.7 0.0 14.5 14.2 14.2 Italy 56.3 0.9 2.4 1608.7 0.0 13.5 13.5 12.9 Netherlands 73.2 1.1 2.0 1352.1 4.1 3.6 3.6 5.5 Norway 75.5 0.0 0.8 1336.3 0.1 4.6 4.8 5.1 Portugal 71.2 1.4 2.0 1702.2 0.0 13.6 13.6 10.8 Sweden 72.8 0.0 2.0 1553.4 0.6 1.8 1.8 1.8 Spain 57.8 3.9 4.4 1798.5 0.0 5.2 4.4 2.4 Switzerland 83.9 0.2 5.0 1537.0 0.0 6.7 5.8 5.9 United Kingdom 72.3 0.0 0.4 1623.9 0.0 3.3 3.3 2.8 Mean Absolute 67.7 1.2 1.9 1573.3 0.6 6.9 6.7 6.6 US 70.9 0.4 0.4 1817.1 1.2 5.9 5.9 1.9 ALFS, 2016 Rel. and LFSsa, 2016 Rel. are the percentage deviation of the ALFS and LFSsa employment rates (each taken from the most current data release) from the ORR employment rate for the year 2003. The employment rate is measured as civilian employment over the population 15 to 64. Y Rel. is the percentage deviation of average hours per employed from the TED release in year Y from the ORR average hours per employed (TED release 2008) for the year 2003. all results for 2003, the latest year available in the Ohanian et al. (2008) data set with information for all variables. In our conclusion, we briefly discuss the remaining papers in Table 1. Rogerson (2006) and Ohanian et al. (2008) calculate hours worked per person as the product of hours worked per employed from the TED and the employment rate from the OECD. In a first step, we investigate the effect of different data releases on each component separately. Then, we look at how hours worked per person are affected by the different releases and how important each margin is in shaping such potential differences. We want to stress again that in all these comparisons, the numbers are reported for the year 2003 but are based on data released in different years. 3.1 Employment Rates and Hours Worked per Employed The first column of Table 2 lists the employment rate (e ORR ) using the Ohanian et al. (2008) data. The next two columns show the percentage difference between the employment rates based on civilian employment from the OECD s ALFS and LFSsa, respectively, and the ORR employment rate. In each case the employment rate is given by civilian employment over the population 15 to 64 for the year 2003 as available in 5
August 2016 from the OECD s website. For example, in Spain, the country with the largest differences, the ALFS employment rate is 3.9% (2.3 percentage points) higher than the ORR employment, whereas the LFSsa employment rate is 4.4% (2.6 percentage points) higher than the ORR employment rate. On average in the European countries the absolute difference between the ALFS or LFSsa employment rate and the ORR employment rate is 1.2% or 1.9% in Europe and 0.4% in the US for both OECD series. While the differences with the ORR employment rate are already not that large on average, the differences between the ALFS and LFSsa employment rates are even smaller as can be indirectly inferred from comparing columns 2 and 3 (Switzerland is the only exception.) The fourth column of Table 2 lists the average annual hours worked per employed using the Ohanian et al. (2008) data, which come from the 2008 release of the TED. While for civilian employment from the OECD we only have access to the most current release of the data, we have several data releases from the TED available. Columns 5 to 8 show the percentage difference between average hours worked per employed from these different releases of the TED, each time compared to the 2008 release. While the 2011 release of the TED and all subsequent releases are available on the Conference Board s website, the September 2006 release was shared with us by Cara McDaniel. For many countries there are no differences at all between the 2006 release of the TED and the 2008 release of the TED, i.e. the data available from Ohanian et al. (2008). The mean absolute difference is only 0.6%, and the largest difference is present for the Netherlands: average hours worked per employed in the 2006 release exceed those from the 2008 release by 4.1%. This changes drastically when we compare the 2011 release with the 2008 release. More than half of the countries have (absolute) differences that are larger than 4.1% (the largest difference between the 2006 and 2008 release). Austria, Ireland, Italy and Portugal display double-digit percentage differences. The mean absolute average amounts to 6.9% for the European countries, with most countries having a positive difference. In contrast, the average hours per employed for the US from the 2011 release are 5.9% lower than those from the 2008 release. The large differences with the 2008 release persist for the European countries for the 2013 and 2016 releases, even though there are some substantial changes between those more recent releases (e.g., for France between 2011 and 2013, or Denmark between 2013 and 2016). For the US the 2016 release is much closer to the 2008 release than the 2011 and 2013 releases are. These results already make clear that data revisions affect the measurement of hours worked per employed substantially, but the measurement of the employment rate only to a small degree. We will back this up more formally further below. 3.2 Hours Worked per Person We now use the formula in Rogerson (2006) and Ohanian et al. (2008) to calculate hours per person for the year 2003. We compare the hours per person directly obtained from Ohanian et al. (2008), labeled as H ORR, to those using the most recent data releases, labeled as H Current Rel.. Specifically, we calculate the latter by multiplying average hours worked per employed from the current release of the TED (May 2016 release) 6
Table 3: Hours Worked per Person Differences for the Year 2003 % of Dev. Explained by Country H ORR H Current Rel. Current Rel. e H E Austria 1028.8 1220.0 18.6 2.1 102.1 Belgium 948.2 943.7 0.5 444.4 544.4 Denmark 1133.6 1121.2 1.1 128.0 228.0 France 892.5 957.8 7.3 44.9 55.1 Germany 910.7 921.6 1.2 198.6 98.6 Greece 1152.3 1235.5 7.2 15.4 115.4 Ireland 1090.8 1251.4 14.7 3.3 96.7 Italy 905.4 1031.3 13.9 6.6 93.4 Netherlands 989.9 1056.0 6.7 16.6 83.4 Norway 1008.9 1060.2 5.1 0.0 100.0 Portugal 1211.2 1360.6 12.3 11.0 89.0 Sweden 1131.0 1151.5 1.8 0.2 100.2 Spain 1039.0 1054.0 1.4 270.0 170.0 Switzerland 1289.7 1363.0 5.7 2.9 102.9 United Kingdom 1174.0 1206.4 2.8 1.1 101.1 Mean 1060.4 1129.0 6.5 US 1287.5 1268.2 1.5 26.7 126.7 Current Rel. is the percentage deviation of H Current Rel. from H ORR, i.e. H Current Rel. H ORR H ORR. The decomposition in columns 4 and 5 is constructed as follows: H Current Rel. H ORR =e ALFS HCurrent E Rel. e ORR HORR E ) H Current Rel. H ORR =e ALFS (H Current E Rel. HE ORR + HORR E (e ALFS e ORR ) 1 = e ( ALFS H E Current Rel. HORR) E + HE ORR (e ALFS e ORR ) H Current Rel. H }{{ ORR H } Current Rel. H }{{ ORR } = H E (Col. 5) = e (Col. 4) (1) e is the fraction of H Current Rel. H ORR accounted for by differences between the ALFS and ORR employment rate. H E is the fraction of H Current Rel. H ORR accounted for by differences between hours per employed from the 2016 TED release and the 2008 TED release. Note that this decomposition is not unique. We weight the hours per employed difference by e ALFS and the employment rate difference by HORR E. Using as weights e ORR and HCurrent E Rel. leaves the results virtually unchanged. with the ALFS employment rate (downloaded in August 2016 from the OECD s website). 7 As a reminder, we report the hours for the year 2003, based on data released in different years. The first column of Table 3 shows H ORR, the second columns shows H Current Rel., and the third column shows the percentage deviation of H Current Rel. from H ORR. For the European countries, hours per person using the most currently available data are on average 6.5% larger than using the data from Ohanian et al. (2008), while for the US hours worked per person are 1.5% lower in the most currently available data. The last two columns show what fraction of 7 We use the ALFS employment rate rather than the LFSsa employment rate because the former shows a smaller mean absolute difference with the employment rate used by Ohanian et al. (2008). 7
Table 4: Hours Worked per Person Relative to the US for the Year 2003 Country ORR Current Rel. NIPA (TED) NIPA (OECD) LFS Austria 20.1 3.8 4.9 3.5 17.0 Belgium 26.4 25.6 25.3 24.3 30.5 Denmark 12.0 11.6 12.2 10.9 14.5 France 30.7 24.5 23.2 22.1 27.2 Germany 29.3 27.3 21.4 20.2 25.9 Greece 10.5 2.6 1.4 0.0 15.3 Ireland 15.3 1.3 2.1 0.7 17.0 Italy 29.7 18.7 11.3 10.0 31.9 Netherlands 23.1 16.7 15.5 14.3 23.0 Norway 21.6 16.4 15.6 14.4 19.5 Portugal 5.9 7.3 6.3 7.9 8.2 Sweden 12.2 9.2 7.9 6.6 17.1 Spain 19.3 16.9 14.1 12.8 23.8 Switzerland 0.2 7.5 5.7 7.2 4.1 United Kingdom 8.8 4.9 5.8 4.5 14.6 Mean 17.6 11.0 9.9 8.6 19.3 the hours per person difference is accounted for by differences in the employment rate and by differences in hours per employed. Equation (1) Table 3 states the formula for these calculations. For Belgium, Denmark, Germany, Sweden, and Spain, this decomposition is less informative because the (weighted) differences in hours worked per employed and employment rates are divided by the small difference in hours worked per person (less than 2% in absolute value). We therefore do not show the mean over all European countries. For the remaining countries, the hours per employed differences account for 55% in France, and at least 83% (Netherlands) in the other countries of the hours per person difference for the year 2003 between the ORR data based on the 2008 TED release and those using the most current release from 2016. 4 The Europe-US Hours per Person Gap: The Effect of Different Data Releases and Formulas In this section, we analyze the role of the use of different data releases and of different formulas for the measurement of the Europe-US hours gap for the year. In addition, we contrast those findings with the Europe-US hours gap constructed with the LFS by Bick et al. (2017). Table 4 shows in the first two columns the hours per person gap relative to the US for H ORR (using the original Ohanian et al. (2008) data, i.e. column 1 in Table 3) and for H Current Rel. (using the latest release of the same data sources used by Ohanian et al. (2008), i.e. column 2 in Table 3) for the year 2003. Constructing hours per person as in Rogerson (2006) and Ohanian et al. (2008), but using the most current release yields 8
a much smaller gap of -11.0% between Europe and the US, compared to -17.6% based on the original ORR data. As shown in Table 3, this is mostly driven by major revisions of the hours per employed data from the TED between the 2008 release and later releases. Column 3 in turn shows hours worked per person using the NIPA formula McDaniel (2011) and Bick et al. (2017) and the TED data. This implies that employment refers to total employment in hours per employed and the employment rate. Hence, the only difference between columns 2 and 3 is that the employment figures cancel out in column 3 but not in 2. This has only a small effect on the Europe-US hours gap of on average 1.1 percentage points. Germany and Italy stand out with large differences. Column 4 shows our calculations if we use the OECD hours rather than the TED hours. The Europe-US hours gaps differ only by 1.3 percentage points, which is mostly driven by a higher estimate of hours per person in the US in the TED. As the last column of Table 4 shows, it turns out that the Europe-US hours gap in the original Ohanian et al. (2008) data set is quite similar to the one we find in LFS data. In Bick et al. (2017) we provide a detailed discussion of the potential forces behind the different NIPA and LFS estimates using the most recent OECD release. LFS and NIPA data differ conceptually along two dimensions. First, LFS data cover only civilian, non-institutionalized residents aged 15 and older, while the NIPA does not impose these restrictions to ensure that the labor inputs are consistent with the measurement of gross domestic output (GDP). Second, the NIPA estimates are usually constructed in country-specific ways from multiple data sources (administrative data, social security data, employer surveys, labor force surveys, census data, etc.). We show suggestive evidence that the differences in population coverage are not very important. For the US, Abraham et al. (2013) investigate which features of the underlying data sources drive the differences between NIPA and LFS employment estimate, and Eldridge et al. (2004) and Frazis and Stewart (2010) do the same for hours works per employed. While the details are specific to the US, these papers highlight advantages and disadvantages of household survey data used in the LFS estimates vs. administrative data used in the NIPA estimates. The combination of multiple data sources might deliver more accurate estimates of employment and hours worked for a given country. The downside is that the cross-country comparability suffers, despite the efforts to harmonize measurement through the Systems of National Accounts, see Fleck (2009). In fact, the OECD remarks on its website that The [hours worked] data are intended for comparisons of trends over time; they are unsuitable for comparisons of the level of average annual hours of work for a given year, because of differences in their sources and recommends using employment rates based on labor force surveys for cross-country comparisons: National Labor Force Surveys are the best way to capture unemployment and employment according to the ILO guidelines that define the criteria for a person to be considered as unemployed or employed... While data from LFS make international comparisons easier compared to a mixture of survey and registration data, there are some differences across countries in coverage, survey timing, etc, that may affect international comparisons of labour market outcomes.. 8 The approach in Bick et al. (2017) deals with one of the main differences in the 8 Both quotes we retrieved from the OECD s website on March 10, 2017: http: //stats.oecd.org/index.aspx?datasetcode=anhrs and http://www.oecd.org/els/emp/ basicstatisticalconceptsemploymentunemploymentandactivityinlabourforcesurveys.htm. 9
cross-country comparability of the LFS, namely the survey timing. 9 If one is interested in hours worked for different demographic subgroups, the LFS is the only option. For aggregate applications only, researchers should be aware of the differences between the LFS and NIPA data on the one hand and the potential for major revisions of the latter over time. 5 Conclusion In this note we compare the effect of different formulas used in the macro literature for calculating hours worked per person and the effect of different data releases on the hours estimates. In doing so, we focus on the data provided by Ohanian et al. (2008). We show that the revisions of hours worked per employed in the TED have a large impact on the conclusions drawn. Put differently, if Rogerson (2006) would have had today s release of the data, he would have found an about 40% lower Europe-US hours gap (-11.0%) than what he found with the data available in the mid 2000s (-17.6%). Using labor force survey data, which are less subject to data revisions, we find a Europe-US hours gap of -19%. Since McDaniel (2011) uses the 2007 release of the TED data, the facts in her paper are affected by revisions in a similar way as those in Rogerson (2006) and Ohanian et al. (2008). Ragan (2013) in turn uses average hours per employed from the OECD and is thus not affected by any revisions of the TED data. However, the OECD average hours worked per employed also underwent revisions. For the (smaller) set of European countries in her data, the average absolute difference in hours worked per employed between the release used by her and the most recent release of the same data is 3.8%, see Table A.2. This is a smaller difference than between the different releases of the TED, but still substantial. Moreover, the revisions by the OECD are not due to a change of the guidelines in the System of National Accounts (SNA 93 vs. SNA 2008). The OECD provides on its website NIPA employment and NIPA hours under both guidelines. For the most recent release, the differences are small for most countries with the exception of the Netherlands, Portugal, and Spain, see Table A.3. Finally, like Ragan (2013), Prescott (2004) uses hours per employed directly from the OECD. Using the same set of countries (US, France, Italy, Germany, and the UK) and time period (1993-96) as he does, we qualitatively reconfirm our finding from the comparison with Rogerson (2006) and Ohanian et al. (2008) for the year 2003; for a detailed discussion, see the Appendix. Relying on the most recent data releases from the OECD or TED yields a smaller Europe-US hours gap than when using data from the same sources available to researchers in the early 2000s. Finally, as we show in Appendix B, the data revisions also affect the measurement of time trends in hours worked per person. While the secular decrease in European hours worked per person between 1956 and 2003 is present both in the data by Ohanian et al. (2008) and using the most current release of the same data, the decline in the sample of European countries is 6.1 percentage points, or in relative terms 27%, 9 Other reasons impeding the comparability across time and countries of the LFS, which we cannot adjust for, are the revision of population figures used for population adjustment on the basis of new population censuses, as well as changes in the sampling design, and content or order of the questionnaire. For details, see http://ec.europa.eu/eurostat/statistics-explained/ index.php/eu_labour_force_survey (retrieved on March 10, 2017). 10
smaller in the current release. In the US in turn, hours worked per person increase by 3.6% using the most recent release of the data, and only by 0.4% in the data used by Ohanian et al. (2008). References Abraham, K. G., J. Haltiwanger, K. Sandusky, and J. R. Spletzer (2013). Exploring Differences in Employment between Household and Establishment Data. Journal of Labor Economics 31(2), S129 S172. Alesina, A., E. Glaeser, and B. Sacerdote (2005). Work and Leisure in the United States and Europe: Why So Different? NBER Macroeconomics Annual 20, 1 64. Bick, A., B. Brüggemann, and N. Fuchs-Schündeln (2017). Hours Worked in Europe and the US: New Data, New Answers. Working Paper. Eldridge, L. P., M. E. Manser, and P. F. Otto (2004). Alternative measures of supervisory employee hours and productivity growth. Monthly Labor Review April, 9 28. Faggio, G. and S. Nickell (2007). Patterns of Work Across the OECD. Economic Journal 117, F416 F440. Fleck, S. E. (2009, May). International Comparisons of Hours Worked: An Assessment of Statistics. Monthly Labor Review 132(5), 3 31. Frazis, H. and J. Stewart (2010). Why Do BLS Hours Series Tell Different Stories About Trends in Hours Worked? BLS Working Paper 433. McDaniel, C. (2011). Forces Shaping Hours Worked in the OECD, 1960-2004. American Economic Journal: Macroeconomics 3, 27 52. Ohanian, L., A. Raffo, and R. Rogerson (2008). Long-Term Changes in Labor Supply and Taxes: Evidence from OECD Countries, 1956-2004. Journal of Monetary Economics 55, 1353 1362. Prescott, E. C. (2004). Why Do Americans Work So Much More Than Europeans? Federal Reserve Bank of Minneapolis Quarterly Review 28, 2 13. Ragan, K. (2013). Taxes, Transfers and Time Use: Fiscal Policy in a Household Production Model. American Economic Journal: Macroeconomics 5(1), 168 192. Rogerson, R. (2006). Understanding Differences in Hours Worked. Review of Economic Dynamics 9, 365 409. 11
A Appendix Cross-Section A.1 Comparison with Prescott (2004) Table A.1 shows average hours worked per person over the years 1993 to 1996 relative to the US for the four European countries included in Prescott (2004). The first column restates the numbers from his paper, while the second column provides the calculation using his formula but the most current releases from the same data sources he used for the years 1993 to 1996. Note that in contrast to our previous analysis, and in line with Prescott (2004), employment refers here to civilian plus non-civilian employment. Moreover, we use in column 2 here as Prescott (2004) the average hours worked per employed from the OECD s Labour Database and not total hours divided by total employment from the National Account Database. Recall however that for most countries and years the latter are used to calculate the former and thus both coincide for the most recent release of the data. As for our previous analysis with the Ohanian et al. (2008) data, the implied Europe-US hours per person gap becomes much smaller (by 4 percentage points) once we use the most currently released data. In the spirit of the exercise in the main body of this paper, we should compare column 2 to hours per person using our NIPA formula with the OECD NIPA data. Unfortunately, NIPA hours and employment by the OECD do not go sufficiently back in time to do so. We therefore show first in column 3 the calculation when we replace the OECD hours per employed with those from the TED. We stick however to the formula used by Prescott (2004) such that employment in the employment rate is civilian plus non-civilian employment. Column 4 uses the TED data but our NIPA formula where employment cancels out. Comparing columns 2 and 3 shows that using the most recent TED hours worked per employed implies an even smaller hours gap. Similar to before, a comparison between columns 3 and 4 shows that the gap becomes even smaller when employment cancels out. Yet, the differences caused by changes in data releases between columns 1 and 2 are substantially larger than the ones caused by changes in the formula between columns 2, 3, and 4. While we are not able to conduct the analysis for Prescott (2004) as carefully as for Rogerson (2006) and Ohanian et al. (2008) because of the lack of data, our main conclusions remains intact. Using the most recent data releases from the OECD or TED yields a smaller Europe-US hours gap than using the releases available to researchers in the early 2000s. Moreover, the Europe-US hours gap is similar between Prescott (2004) and our LFS hours. Table A.1: Hours Worked per Person Relative to the US: Avg. over the Years 1993-96 Country H Prescott H = ê ALFS H E OECD H = ê ALFS H E T ED NIPA (TED) LFS France 32.0 25.0 23.8 23.8 26.8 Germany 25.0 25.0 23.8 21.4 22.4 Italy 36.0 27.1 25.8 20.9 37.5 United Kingdom 12.0 11.5 10.7 11.3 15.8 Mean 26.2 22.1 21.1 19.3 25.6 12
A.2 Tables Table A.2: Hours Worked per Employed for the Years 1998-2003: Ragan (2013) vs. OECD 2016 Release Country H E Ragan H E 2016 Rel. 2016 Rel. Belgium 1590.0 1584.8 0.3 Denmark 1548.0 1482.3 4.2 France 1584.0 1531.2 3.3 Germany 1468.0 1453.7 1.0 Italy 1853.0 1845.9 0.4 Norway 1441.0 1441.3 0.0 Portugal 1776.0 1901.7 7.1 Sweden 1609.0 1626.3 1.1 Spain 1813.0 1757.2 3.1 United Kingdom 1709.0 1700.8 0.5 Mean (Absolute) 1587.0 1639.1 3.8 US 1831.0 1825.5 0.3 2016 Rel. is the percentage deviation of average hours per employed from the OECD Release in year 2016 from the OECD Release used by Ragan (2013). Table A.3: OECD s SNA 93 vs. SNA 2008 for the Year 2003 %-Deviation SNA 93 from SNA 2008 Country Employment Rate Hours per Employed Hours per Person Austria 0.6 0.3 0.8 Belgium 0.2 0.2 0.4 Denmark 0.8 1.3 0.4 France 0.1 0.8 0.9 Germany 0.8 1.0 0.2 Greece 0.2 0.4 0.6 Ireland 0.0 0.0 0.0 Italy 0.4 0.6 0.1 Netherlands 0.9 3.3 4.2 Norway 0.2 0.2 0.4 Portugal 1.0 2.4 3.5 Sweden 0.0 0.0 0.0 Spain 2.1 2.1 4.2 Switzerland 0.8 0.8 0.0 United Kingdom 0.2 0.0 0.2 Mean -0.1-0.3-0.4 US 0.0 0.2 0.2 13
B Appendix Time-Series The revisions do not only affect the level estimates of employment and hours but also time-series trends. Similar to the cross-sectional results, the impact of the revisions is larger for hours worked per employed than for employment rates. Table B.1 shows the percentage point change in the employment rate between 1956 and 2003 in the Ohanian et al. (2008) data and for the 2016 release of civilian employment from the ALFS. On average the trends in the European countries are basically the same, which is also true for the US. There are however a few countries which stand out. In Denmark and Portugal, the most recently available data suggest an increase that is 5.1 and 7.3 percentage points, respectively, larger than in the Ohanian et al. (2008) data. In Greece in turn, the most recent release suggests a decrease of 3.3 percentage compared to an increase of 8.8 percentage points in the Ohanian et al. (2008) data. The different trends for these three countries between the two data releases originate from differences in the employment rate in the early years of the sample. Using 1970 as starting year rather than 1956 would yield essentially the same change in the employment rates. The smaller differences between the two releases in the remaining countries are driven by differences between the two releases at the end of the observation period. Table B.2 compares hours worked per employed from the data by Ohanian et al. (2008) with those from the 2016 release of the TED. While the revision did not change the overall secular pattern of decreasing hours worked per employed over the period 1956 to 2003, in the most current release hours per employed in Europe fell by 5.1 percentage points (or about one fifth) less than in the 2008 release, see Table B.1. These differences are not concentrated on a few countries. Only for Germany, Norway, Sweden, and Spain is the difference of the trend between the two data releases smaller than 2 percentage points. Section B.3 shows the full time-trends. Finally, Table B.3 combines the information in Tables B.1 and B.2 and shows differences in the time trends in hours worked per person between the two data releases. Overall, the European countries display a 6.1 percentage point lower decline in hours worked per person using the most recent release (-16.6% vs. -22.7%). In the US in turn, the increase is 3.2 percentage points larger in the most recent release of the data (3.6% vs. 0.4%). 14
B.1 Tables Table B.1: Time Trends in Employment Rates for Different Releases of OECD Data % Point Change between 1956 and 2003 Country e ORR e ALFS, 2016 Rel. e ALFS, 2016 Rel. e ORR Austria 1.6 1.0 0.5 Belgium 1.2 2.4 1.2 Denmark 4.8 9.9 5.1 France 4.3 2.2 2.1 Germany 4.5 3.0 1.5 Greece 8.8 3.3 12.1 Ireland 0.5 1.1 0.6 Italy 5.6 4.8 0.8 Netherlands 13.7 13.6 0.0 Norway 12.2 12.2 0.0 Portugal 7.3 14.5 7.3 Sweden 0.7 1.8 2.4 Spain 1.5 0.8 2.3 Switzerland 5.9 5.4 0.5 United Kingdom 3.2 3.2 0.0 Mean 2.8 3.5 Mean Absolute 2.4 US 9.1 9.4 0.3 15
Table B.2: Time Trends in Hours Worked per Employed for Different Releases of TED Data % Change between 1956 and 2003 Country H E ORR H E Current Rel. H E Current Rel. HE ORR Austria 28.1 14.3 13.8 Belgium 30.7 22.8 7.8 Denmark 32.9 25.9 7.0 France 29.4 33.1 3.7 Germany 35.8 37.4 1.6 Greece 14.8 7.7 7.2 Ireland 30.1 22.7 7.5 Italy 18.1 15.4 2.7 Netherlands 34.4 25.2 9.2 Norway 32.5 32.0 0.4 Portugal 24.5 12.9 11.6 Sweden 20.1 19.1 1.0 Spain 11.8 10.5 1.3 Switzerland 23.0 16.4 6.6 United Kingdom 24.2 18.2 6.0 Mean -26.0-20.9 Mean Absolute 5.8 US 12.5 10.1 2.4 16
Table B.3: Time Trends in Hours Worked per Person for Different Releases of TED/OECD Data % Change between 1956 and 2003 Country H ORR H Current Rel. H Current Rel. H ORR Austria 26.4 12.9 13.5 Belgium 29.2 19.6 9.7 Denmark 28.4 14.8 13.5 France 33.9 35.3 1.4 Germany 40.1 40.2 0.1 Greece 0.2 12.5 12.4 Ireland 29.6 21.4 8.2 Italy 25.5 22.0 3.5 Netherlands 19.4 8.3 11.1 Norway 19.4 18.9 0.5 Portugal 16.0 9.0 25.0 Sweden 20.8 17.0 3.8 Spain 14.0 9.4 4.6 Switzerland 17.3 10.7 6.6 United Kingdom 20.7 14.4 6.3 Mean -22.7-16.6 Mean Absolute 8.0 US 0.4 3.6 3.2 17
B.2 Employment Rates 1956-2003: Different Releases of Civilian Employment by the OECD Figure B.1: Austria Employment Rate in % 62 64 66 68 70 Normalized Employment Rate.9.95 1 1.05 Figure B.2: Belgium Employment Rate in % 52 54 56 58 60 62 Normalized Employment Rate.9.95 1 1.05 Figure B.3: Denmark Employment Rate in % 65 70 75 80 Normalized Employment Rate.95 1 1.05 1.1 1.15 1.2 18
Figure B.4: France Employment Rate in % 58 60 62 64 66 68 Normalized Employment Rate.85.9.95 1 Figure B.5: Germany Employment Rate in % 60 62 64 66 68 70 Normalized Employment Rate.9.95 1 1.05 Figure B.6: Greece Employment Rate in % 50 55 60 65 Normalized Employment Rate.8.9 1 1.1 1.2 19
Figure B.7: Ireland Employment Rate in % 50 55 60 65 70 Normalized Employment Rate.8.85.9.95 1 1.05 Figure B.8: Italy Employment Rate in % 50 55 60 65 Normalized Employment Rate.8.85.9.95 1 Figure B.9: Netherlands Employment Rate in % 50 55 60 65 70 75 Normalized Employment Rate.8.9 1 1.1 1.2 1.3 20
Figure B.10: Norway Employment Rate in % 60 65 70 75 80 Normalized Employment Rate.9 1 1.1 1.2 Figure B.11: Portugal Employment Rate in % 55 60 65 70 75 Normalized Employment Rate.9 1 1.1 1.2 1.3 Figure B.12: Spain Employment Rate in % 45 50 55 60 Normalized Employment Rate.7.8.9 1 21
Figure B.13: Sweden Employment Rate in % 70 75 80 85 Normalized Employment Rate.95 1 1.05 1.1 1.15 Figure B.14: Switzerland Employment Rate in % 70 75 80 85 90 Normalized Employment Rate.95 1 1.05 1.1 1.15 Figure B.15: United Kingdom Employment Rate in % 64 66 68 70 72 Normalized Employment Rate.9.95 1 1.05 22
Figure B.16: United States Employment Rate in % 60 65 70 75 Normalized Employment Rate.95 1 1.05 1.1 1.15 1.2 23
B.3 Hours Worked per Employed 1956-2003: Different Releases of TED Data Figure B.17: Austria Hours Worked per Employed 1400 1600 1800 2000 2200 Normalized Hours Worked per Employed.7.8.9 1 Figure B.18: Belgium Hours Worked per Employed 1600 1800 2000 2200 2400 Normalized Hours Worked per Employed.7.8.9 1 Figure B.19: Denmark Hours Worked per Employed 1400 1600 1800 2000 2200 Normalized Hours Worked per Employed.6.7.8.9 1 24
Figure B.20: France Hours Worked per Employed 1400 1600 1800 2000 2200 Normalized Hours Worked per Employed.7.8.9 1 Figure B.21: Germany Hours Worked per Employed 1400 1600 1800 2000 2200 Normalized Hours Worked per Employed.6.7.8.9 1 Figure B.22: Greece Hours Worked per Employed 1900 2000 2100 2200 2300 Normalized Hours Worked per Employed.8.85.9.95 1 25
Figure B.23: Ireland Hours Worked per Employed 1600 1800 2000 2200 2400 Normalized Hours Worked per Employed.7.8.9 1 Figure B.24: Italy Hours Worked per Employed 1600 1800 2000 2200 Normalized Hours Worked per Employed.8.85.9.95 1 Figure B.25: Netherlands Hours Worked per Employed 1400 1600 1800 2000 2200 Normalized Hours Worked per Employed.6.7.8.9 1 26
Figure B.26: Norway Hours Worked per Employed 1400 1600 1800 2000 2200 Normalized Hours Worked per Employed.7.8.9 1 Figure B.27: Portugal Hours Worked per Employed 1600 1800 2000 2200 2400 Normalized Hours Worked per Employed.75.8.85.9.95 1 Figure B.28: Spain Hours Worked per Employed 1700 1800 1900 2000 2100 Normalized Hours Worked per Employed.85.9.95 1 1.05 27
Figure B.29: Sweden Hours Worked per Employed 1500 1600 1700 1800 1900 2000 Normalized Hours Worked per Employed.75.8.85.9.95 1 Figure B.30: Switzerland Hours Worked per Employed 1500 1600 1700 1800 1900 2000 Normalized Hours Worked per Employed.75.8.85.9.95 1 Figure B.31: United Kingdom Hours Worked per Employed 1600 1800 2000 2200 Normalized Hours Worked per Employed.75.8.85.9.95 1 28
Figure B.32: United States Hours Worked per Employed 1700 1800 1900 2000 2100 Normalized Hours Worked per Employed.85.9.95 1 29
B.4 Hours Worked per Person 1956-2003: Different Releases of TED and OECD Data Figure B.33: Austria Hours Worked per Person 1000 1100 1200 1300 1400 Normalized Hours Worked per Person.7.8.9 1 Figure B.34: Belgium Hours Worked per Person 800 1000 1200 1400 Normalized Hours Worked per Person.7.8.9 1 Figure B.35: Denmark Hours Worked per Person 1000 1200 1400 1600 Normalized Hours Worked per Person.7.8.9 1 1.1 30
Figure B.36: France Hours Worked per Person 800 1000 1200 1400 1600 Normalized Hours Worked per Person.6.7.8.9 1 Figure B.37: Germany Hours Worked per Person 800 1000 1200 1400 1600 Normalized Hours Worked per Person.6.7.8.9 1 Figure B.38: Greece Hours Worked per Person 1000 1100 1200 1300 1400 Normalized Hours Worked per Person.8.85.9.95 1 1.05 31
Figure B.39: Ireland Hours Worked per Person 1000 1200 1400 1600 Normalized Hours Worked per Person.6.7.8.9 1 Figure B.40: Italy Hours Worked per Person 800 1000 1200 1400 Normalized Hours Worked per Person.7.8.9 1 Figure B.41: Netherlands Hours Worked per Person 800 900 1000 1100 1200 Normalized Hours Worked per Person.6.7.8.9 1 32
Figure B.42: Norway Hours Worked per Person 1000 1100 1200 1300 Normalized Hours Worked per Person.8.85.9.95 1 Figure B.43: Portugal Hours Worked per Person 1100 1200 1300 1400 1500 Normalized Hours Worked per Person.8.9 1 1.1 Figure B.44: Spain Hours Worked per Person 800 900 1000 1100 1200 1300 Normalized Hours Worked per Person.7.8.9 1 1.1 33
Figure B.45: Sweden Hours Worked per Person 1100 1200 1300 1400 1500 Normalized Hours Worked per Person.8.85.9.95 1 Figure B.46: Switzerland Hours Worked per Person 1200 1300 1400 1500 1600 Normalized Hours Worked per Person.8.85.9.95 1 Figure B.47: United Kingdom Hours Worked per Person 1100 1200 1300 1400 1500 Normalized Hours Worked per Person.75.8.85.9.95 1 34
Figure B.48: United States Hours Worked per Person 1100 1200 1300 1400 Normalized Hours Worked per Person.9.95 1 1.05 1.1 35