To Work More or Less? The Impact of Taxes and Life Satisfaction on the Motivation to Work in Continental and Eastern Europe

Nadirov, O., Aliyev, K., & Dehning, B. (2017). To work more or less? The impact of taxes and life satisfaction on the motivation to work in continental and eastern Europe. Economics & Sociology, 10(3), 266-280.

15 Pages Posted: 31 Jul 2020

See all articles by Orkhan Nadirov

Orkhan Nadirov

affiliation not provided to SSRN

Khatai Aliyev

Azerbaijan State University of Economics (UNEC); Baku Engineering University

Bruce Dehning

Chapman University - The George L. Argyros School of Business & Economics

Date Written: 2017

Abstract

Using country-level data from 2000-2013, we test the relationship between life satisfaction (measured as how people evaluate their life as a whole rather than their current feelings) and the motivation to work (measured as aggregate hours of work). Our hypothesis is that even after controlling for average labor income tax rates in countries with high and low average hours worked, there is a significant negative association between the motivation to work and life satisfaction. The main findings of this paper are that the increase in the motivation to work per employee comes at the expense of life satisfaction, and differences in average tax rates on labor income cannot account for differences in time allocation. Once life satisfaction is included, the hypotheses of previous neoclassical economic studies are almost irrelevant in determining the response of market hours to higher average tax rates on labor income. In line with our assumption, we find a negative relationship between life satisfaction and the motivation to work in the cross-country examinations. In countries with the highest hours worked (Hungary, Estonia), wealth is generally preferred to leisure and in countries with the lowest hours worked (France, Germany), leisure is preferred to wealth.

Keywords: motivation to work; labor supply; labor taxes; life satisfaction

JEL Classification: H20; J01; J29

Suggested Citation

Nadirov, Orkhan and Aliyev, Khatai and Dehning, Bruce, To Work More or Less? The Impact of Taxes and Life Satisfaction on the Motivation to Work in Continental and Eastern Europe (2017). Nadirov, O., Aliyev, K., & Dehning, B. (2017). To work more or less? The impact of taxes and life satisfaction on the motivation to work in continental and eastern Europe. Economics & Sociology, 10(3), 266-280., Available at SSRN: https://ssrn.com/abstract=3643401

Orkhan Nadirov

affiliation not provided to SSRN

Khatai Aliyev (Contact Author)

Azerbaijan State University of Economics (UNEC) ( email )

Istiglaliyyat street 6
Baku, AZ Az1001
Azerbaijan

Baku Engineering University ( email )

Hasan Aliyev str. 120
Khirdalan, Baku AZ 0101
Azerbaijan

Bruce Dehning

Chapman University - The George L. Argyros School of Business & Economics ( email )

333 N. Glassell
Orange, CA 92866
United States

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