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First Quarter 2019, 
Vol. 101, No. 1
Posted 2019-01-14

Data Revisions of Aggregate Hours Worked: Implications for the Europe-U.S. Hours Gap

by Alexander Bick, Bettina Brüggemann, and Nicola Fuchs-Schündeln

Abstract

In this article, we document that the Organisation for Economic Co-operation and Development (OECD) and the Conference Board's Total Economy Database (TED) have substantially revised their measures of hours worked over time. Relying on the data used by Rogerson (2006) and Ohanian et al. (2008), we find that, for 2003, hours worked per person in Europe is 18 percent lower than hours worked in the United States. Using the 2016 releases of the same data for 2003 yields a gap that is 40 percent smaller—that is, only 11 percent lower. Using labor force survey data, which are less subject to data revisions, we find a Europe-U.S. hours gap of –19 percent.


Alexander Bick is a visiting scholar at the Federal Reserve Bank of St. Louis and an associate professor in the Department of Economics at the W.P. Carey School of Business, Arizona State University; Bettina Brüggemann is an assistant professor in the Department of Economics at McMaster University; and Nicola Fuchs-Schündeln is a professor of Macroeconomics and Development at Goethe University Frankfurt and a research fellow at the Centre for Economic Policy Research. The authors thank Valerie Ramey for helpful comments and the encouragement to write this article. The authors gratefully acknowledge financial support from the Cluster of Excellence "The Formation of Normative Orders" at Goethe University and the European Research Council under Starting Grant No. 262116. 



INTRODUCTION

Rogerson (2006) documents large differences in hours worked per person among Organisation for Economic Co-operation and Development (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 those in the United States. In this article, we show that using the 2016 releases of the same data yields a gap between European and U.S. hours worked per person that is about 40 percent smaller than the gap he found. Because the data used by Rogerson (2006) were not published along with his study, we replicate his results using the data from his companion article with Ohanian and Raffo (Ohanian et al., 2008), available online in the Journal of Monetary Economics. The implied Europe-U.S. hours worked per person gap is –17.6 percent for 2003, the latest available year in their data set. Using the 2016 release of the same data yields a gap for 2003 of only –11.0 percent, thus 37.5 percent lower. We document that these drastically different results originate mainly 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-U.S. hours worked per person gaps in Prescott (2004) and McDaniel (2011) are also subject to such revisions. Using labor force survey data, which are less subject to data revisions, we find a Europe-U.S. hours gap of –19 percent. We further show that the different formulas used to calculate hours worked per person in these articles have only negligible effects on the estimated Europe-U.S. hours worked per person gap. 


Read the full article: https://files.stlouisfed.org/f...