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Salamanca Spain - Travel Essentials for Salamanca  You are here: About > Travel > Europe for Visitors > Spain and Portugal > Spain > Cities and Islands of Spain > Salamanca Spain - Travel Essentials for Salamanca Travel Go Europe Essentials European Vacation Planning Map Europe Travel 101 - Before you Go European Distances The Best of Europe European Photo Gallery Articles & Resources Europe Travel Planning What to do In Europe Lodging - Hotels and More European Travel Maps Sex and Nudism Travel Photography Transportation Benelux Countries France Germany Austria Switzerland Greece Italy and Malta Travel Info Scandinavian Travel Spain and Portugal United Kingdom and Ireland Buyer's Guide Before You Buy Top Picks Italy Travel Guidebooks Europe Travel Guidebooks German Travel Guidebooks Product Reviews Forums Help FREE Newsletter Sign Up Now for the Europe for Visitors newsletter! See Online Courses   Search Europe for Visitors Location map showing Salamanca, Spain James Martin Stay up to date! Location map showing Salamanca, Spain James Martin Email to a friend Print this page Spain Resources Spain Map and Travel Essentials Spain Links Eating in Spain Salamanca and Environs Castilla y Leon Travel Links Salamanca Picture Gallery Salamanca on the Web Salamanca Festivals Salamanca Museums Most Popular Europe Map - Distances Between Cities in Western Europe Europe's Best Nudist Beaches Europe Picture Galleries Italy Pictures Europe Travel 101 - Before You Travel to Europe for the Firs... What's Hot Power Adapters Noord-Holland - Delights of North Holland Travel Visiting Pompeii Italy Guidebooks Naples - Getting There Related Topics France for Visitors Greece for Visitors United Kingdom / Ireland for Visitors Eastern Europe for Visitors Italy for Visitors Salamanca Spain - Travel and Tourism Information Spain Travel Destination From James Martin , Your Guide to Europe for Visitors . FREE Newsletter. Sign Up Now! Location of Salamanca:  Salamanca is located in the southwest corner of Castile y Leon region of Spain, in the western part of Spain near Portugal. The old part of the city is found south of the modern city, on the banks of the Rio Tormes. Salamanca is 212 km west of Madrid. Population:  Salamanca has 363,000 people. Salamanca - Train Station:  Salamanca's train station, called the Paseo de la Estación de Ferrocarril, is located northwest of the old town. To get to the old section from the train station, exit and walk left on the Paseo de la Estacion. Just past the Plaza de Espana is the old city. Salamanca - Bus Station:  The main bus terminal is at Av. Filiberto Villalobos, northwest of the old town. Busses from Madrid, Avila, Zamora, Valladolid, León, and Cáceres use this station. Language:  The language spoken is Spanish, of course. Being a university town, you'll have no problem using English. In fact, it's hard to find a restaurant in Salamanca that doesn't have a menu in English with pictures of the food, a bad sign, usually. There are many language schools in Salamanca; it's an ideal place to study Spanish if you're so inclined. Food and Drink in Salamanca:  Roasts are popular--you'll see cabrito (young goat) and Cochinillo (suckling pig). Besides the Spaniards who've come here to study, Moors and Jews have left their mark on the cuisine of Salamanca--a very wide variety of dishes are available. There are many bars where you can enjoy tapas or pinchos, small bits of appetizers you have with a beer or glass of wine. Tourist Information:  You'll find tourist information in the Plaza Mayor and in the Casa de las Conchas. Festivals in Salamanca:  The most interesting sounding festival, it seems to me, would be the Lenten festival of Lunes de Aguas, the Monday of the Waters, where the women of ill repute are sent from Salamanca out to La Salud de Tejares to pass Lent, returning of the Monday of Quasimodo. People of Salamanica waited for their return at the Roman bridge with Easter cakes. How can you restist? See the festival links in the upper right for more. When to go to Salamanca:  Spring and fall are ideal. Summer temperatures run above 40 degrees C many days, and winter November through March can be quite cold. What to do in Salamanca:   Cathedrals Old and New - They're right next to each other. The older is Romanesque, begun in 1140, the new one is a sprightly 490 years old, having been started in 1513 and taking 200 years to complete. Southern section of the old town in Plaza Juan XXII. Open daily 9:30am-1pm and 4-7:30pm in the season. The University - I like nothing better than to stroll around the University quarter. It's the oldest in Spain and chock full of interesting architecture and arcades. Have tapas in the Plaza Mayor - It's one of my favorites, so clean that you'll see students sitting and playing chess in the center, while all around people eat, drink and make merry after the sun goes down. Lots of student performances in the evening keep you circulating. Casa de las Conchas - The house of the conch shells is now the Public Library where you can wander around wondering why the US doesn't pay as much attention to aesthetics as other folks in their public buildings. Dating from the 15th century it was considered one of the most representative constructions of the times of the Catholic King and Queen. The Monasteries - Near the cathedral along the Gran Via you can visit several monasteries, including the Convento y Museo de las Duenas, a 16th century building with cloister. There are 15 Museums in Salamanca, where you can see exhibits ranging from Art Deco to Fine Arts to religion. But mostly, this is a fine walking town, from the Roman bridge over the river to the Plaza Mayor, which may likely be the most compelling in Spain. Take a virtual tour of Salamanca with our Salamanca Picture Gallery .        Topic Index | Email to a Friend Our Story | Be a Guide | Advertising Info | Work at About | Site Map | Icons | Help User Agreement | Ethics Policy | Patent Info. | Privacy Policy | Kids' Privacy Policy ©2005 About, Inc., A part of the New York Times Company . All rights reserved. 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Cheap vacations to Orlando - discount hotel + air deals - TripAdvisor Orlando vacation discounts and deals Sign in • Sign up Home > United States > Florida > Orlando > SmartDeals > Vacation packages Orlando tourism: Overview Hotels Flights Attractions Dining Deals Getaways Forums Maps, etc. Discount hotels | Hotel + air deals | All travel offers Search (e.g., Orlando hotels, Las Vegas, Paris art museum) Orlando Orlando Overview Orlando Hotels Flights to Orlando Orlando Deals Discount hotels Hotel + air deals All travel offers Orlando Attractions Orlando Restaurants Orlando Forum Orlando Maps Orlando Discount Hotels Orlando Vacation Packages Free Newsletter Get deals, news and articles on Orlando Plus weekend trip ideas from your hometown Nearby Cities You may also be interested in these deals within five miles of Orlando: Edgewood Deals Winter Park Deals e-mail this page to a friend Orlando vacation packages Acapulco vacation packages Alaska vacation packages Amsterdam vacation packages Anaheim vacation packages Arizona vacation packages Aruba vacation packages Aspen vacation packages Atlanta vacation packages Atlantic City vacation packages Bahamas vacation packages Barbados vacation packages Belgium vacation packages Bermuda vacation packages Boston vacation packages Branson vacation packages Breckenridge vacation packages British Virgin Islands vacation packages Cabo San Lucas vacation packages California vacation packages Canada vacation packages Cancun vacation packages Caribbean vacation packages Colorado vacation packages Costa del Sol vacation packages Cozumel vacation packages Dallas vacation packages Daytona Beach vacation packages Dominican Republic vacation packages Florida vacation packages Florida Keys vacation packages Fort Lauderdale vacation packages France vacation packages Germany vacation packages Grand Canyon National Park vacation packages Greece vacation packages Grenada vacation packages Hawaii vacation packages Hilton Head vacation packages Ibiza vacation packages Ireland vacation packages Italy vacation packages Ixtapa vacation packages Jamaica vacation packages Kauai vacation packages Key West vacation packages Lake Placid vacation packages Lake Tahoe vacation packages Las Vegas vacation packages London vacation packages Los Angeles vacation packages Los Cabos vacation packages Maui vacation packages Mazatlan vacation packages Melbourne vacation packages Mexico vacation packages Miami vacation packages Montreal vacation packages Myrtle Beach vacation packages Nashville vacation packages Nassau vacation packages New York vacation packages New York City vacation packages Niagara Falls vacation packages Nova Scotia vacation packages Oahu vacation packages Orlando vacation packages Paris vacation packages Park City vacation packages Philadelphia vacation packages Phoenix vacation packages Pigeon Forge vacation packages Puerto Rico vacation packages Puerto Vallarta vacation packages Punta Cana vacation packages Quebec City vacation packages Reno vacation packages Rome vacation packages Salt Lake City vacation packages San Antonio vacation packages San Diego vacation packages San Francisco vacation packages Santa Fe vacation packages Scotland vacation packages Seattle vacation packages Spain vacation packages St. Croix vacation packages St. Lucia vacation packages St. Maarten/St. Martin vacation packages St. Thomas vacation packages Sydney vacation packages Texas vacation packages Toronto vacation packages Tucson vacation packages U.S. Virgin Islands vacation packages Vail vacation packages Virginia Beach vacation packages Washington DC vacation packages Whistler vacation packages Read more Orlando tourism Hotel + air deals to Orlando * Featured specials - December 28, 2005 Orlando : Save on hotel + air Expedia Vacations Don't just travel. 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Air Travel May Double

Bloomberg.com: Latin America Updated: New York: Dec 28 17:46 London: Dec 28 22:46 Tokyo: Dec 29 07:46 US AU BZ FP GR HK IM JP LN SM IND : Regions Top Worldwide Regions Asia Australia & New Zealand Canada Europe Germany Japan Latin America U.K. U.S. Markets Economy/Politics Commentary Sports Culture Bloomberg RSS RESOURCES: Bloomberg TV Bloomberg Radio Markets Latin America E-Mail This Story Printer-Friendly Format Venezuelan Economy Grew 9.4 Percent in 2005, Fueled by Government Spending Codelco Union Workers Delay Strike at Chile Copper Mines for Wage Talks Brazilian Central Bank Expects 4 Percent Growth in 2006, Faster Inflation Mexican Air Travel May Double in 3 Years on Discounts (Update2) Dec. 23 (Bloomberg) -- Mexico is preparing for domestic airtravel to double in as few as three years, predicting newdiscount airlines such as Interjet will pull 20 millionpassengers off the bus, the country's aviation chief said. Interjet, the first low-cost carrier to begin service fromthe Mexico City area, introduced fares this month that beatpremium bus travel. Almost 40 million people annually travel 400kilometers or more on buses equipped with televisions, airconditioning, and washrooms between cities served by airports,said Gilberto Lopez Meyer, Mexico's civil aviation director. ``We can double the number of domestic air passengers ifhalf these people begin flying,'' Lopez Meyer said in aninterview in Mexico City on Dec. 20. The first discount fares introduced in Mexico areencouraging, he said. Mexico City-based Interjet, one of fivestartup projects, began flying four routes on Dec. 5 with pricesthat are as little as a quarter of those charged by the nation'slargest airlines, Mexicana and Aeromexico. They can be cheaper than the bus, too. Traveling to thebeach resort of Cancun from Mexico City on a luxury bus run byAutobuses ADO costs 1,284 pesos ($120) and takes up to 23.5hours. Interjet's fares to Cancun from the Toluca airport, 69kilometers from downtown Mexico City, start at 1,205 pesos,including taxes. The flight is two hours long. A round-trip ticket to Guadalaraja from Toluca can be ascheap as 1,144 pesos on Interjet, compared with 5,145 pesoscharged by Mexicana or Aeromexico. ``I hope these prices are here to stay,'' Lopez Meyer said.``If the discount fares are on average 50 percent cheaper thanthe legacy carriers, we'll have achieved our goal.'' Temporary Subsidies Avolar Lineas Aereas SA began flying from the northern cityof Tijuana to four towns in September. Another two carriersprobably will start operations by June, Lopez Meyer said. One issponsored by Mexican billionaires Carlos Slim and EmilioAzcarraga and the other is backed by Brazil's Gol Lineas AereasInteligentes SA. Mexico is Latin America's second-largest aviation marketafter Brazil, with 20 million passengers a year. To help lower fares, the Mexican government is expandingairport capacity and giving the startup carriers temporarysubsidies on services such as fuel delivery that reduceoperating costs by about 10 percent, Lopez Meyer said.Passengers get 50 percent off on airport tax when flying fromsecondary airports. Competitor Reaction Interjet, owned by the son and grandson of former MexicanPresident Miguel Aleman, can break even in a year by maintainingthe current fare structure so long as the planes fly 65 percentfull, Chief Executive Officer Jose Luis Garza said in aninterview in Mexico City. The carrier has a five-class faresystem with a 50-peso difference between them, he said. The Alemans spent $230 million to buy seven Airbus SAS'sA320 from insolvent Italian airline Volare Group SpA and putdown $60 million in equity capital to start Interjet, Garzasaid. Interjet placed firm orders for 10 new Airbus planes andhas options to buy another 10, which would demand investments of$1.2 billion, he said. Interjet has no debt. Reacting to increasing competition, Mexicana and Aeromexicointroduced promotional fares and expanded service to Toluca.Government-owned Aeromexico began flying to the industrial cityof Monterrey from Toluca on Dec. 14 for as little as 822 pesos.At Interjet, fares to Monterrey start at 745 pesos. ``I can make money at this price, but they can't,'' saidGarza, who served as chief financial officer of Aeromexicobetween 1988 and 1990. Airline Sale Discount airlines reduce investor interest in theprivatization auction for Mexicana and Aeromexico last month.The government sold just Mexicana and rejected bids forAeromexico, saying they were too low. Grupo Posadas SA, Mexico'slargest hotel chain, bought Mexicana for $165.5 million plusassumption of $1.27 billion in debt. Shares of Cintra SA, the holding company for Mexicana andAeromexico, tumbled 20 percent the day after the bids wereplaced Nov. 21 and another 18 percent in the three daysfollowing the auction results were announced Nov. 30. Thegovernment plans to put Aeromexico on the block again in early2006. ``We couldn't artificially halt the entry of the low-costairlines because of the sale of Cintra,'' Lopez Meyer said. ``Ifthere's interest in new carriers and all the requirements aremet, we have to issue a license by law.'' To contact the reporter on this story:Adriana Arai at aarai1@bloomberg.net Last Updated: December 23, 2005 13:57 EST ©2005 Bloomberg L.P. All rights reserved. Terms of Service Privacy Policy Trademarks Site Map Help Feedback About Bloomberg Log In/Register Advertising ??????

Russia travel Discount airfare

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European Vacation There's a

Federal Reserve Bank of Minneapolis - The Region - European Vacation (December 2003) I'm at: Home > Publications > The Region > December 2003 > Article Publications Expand All Collapse All The Region Index by Issue Interviews President's Columns fedgazette Index by Issue Topics Index Annual Report Quarterly Review Community Dividend Banking and Policy Studies Articles Toolbox ( advanced search ) December 2003 European Vacation There's a simple reason Americans work longer hours than Europeans, says economist Ed Prescott. And it isn't what you think Douglas Clement Editor It's no secret that Europeans work less than Americans do. Every Labor Day the media tell us that Europeans have just enjoyed weeks of summer vacation while Americans have been toiling away. These stories often depict Americans as hard-working drones who revere material possessions above all else. Europeans meanwhile bask in the good life of long lunches and months at the beach. There is some truth to the portrayal, at least in terms of hours worked. The International Labor Organization reports that the average American worked 1,815 hours in 2002, well above the comparable figures for France (1,545) and Germany (1,444), for example. (The average South Korean, on the other hand, worked over 2,400 hours.) But if it's widely acknowledged that Americans work more hours than Europeans, it remains a puzzle quite why there's such a large difference. With similar economies and social structures—at least relative to the rest of the world—it would seem that labor patterns should also be alike. Social scientists have been hard-pressed to explain the disparity. Most accounts focus on cultural explanations. The most popular is the notion that Europeans have a fuller appreciation of la dolce vita —the sweet life—the Italian version of the idea that life is to be enjoyed, not endured. Work is a means to an end, not an end in itself. The idea of cultural and religious influences on economic activity isn't new. German sociologist Max Weber wrote The Protestant Ethic and the Spirit of Capitalism nearly a century ago, attributing the rise of capitalist economies to the “Protestant work ethic.” It was an immensely persuasive theory in its time, and derivative explanations have held great sway ever since. “Why do Europeans and Americans differ so much in their attitude toward work and leisure? I can think of two reasons,” opines a recent Time magazine essay. “Broadly speaking, Americans value stuff—SUVs, 7,000-sq.-ft. houses—more than they value time, while for Europeans it's the opposite. Second, ... in the puritanical version of Christianity that has always appealed to Americans, religion comes packaged with the stern message that hard work is good for the soul. Modern Europe has avoided so melancholy a lesson.” “It all comes down to what people feel is important and how they feel about their lives,” argues a September 2003 U.S. News & World Report editorial. “We value more money and more stuff; they value more leisure time. ... We are proud of being busy—it is a virtue; being idle is perceived as a vice.” Economic explanations Economists have always been suspect of such cultural explanations. Standard economic theory assumes that people's preferences are, on average, homogeneous, and that choices depend largely on economic factors. Still, while economists agree that dollars and cents lie behind the work pattern differential, there is little harmony among them as to the right economic explanation. Some economists say work regulations keep Europeans from working longer hours and point favorably to recent European reforms on vacation time. Others argue that greater inequality in the United States motivates workers to try harder to get ahead. Most of these explanations come from the perspective of labor economics and its core belief that social structures and institutions such as unions are the major determinants of labor patterns. But in a recent series of papers and lectures, Edward C. Prescott, senior monetary adviser to the Minneapolis Fed and economist at Arizona State University, looks at the labor supply question through the prism of the growth model—a different perspective altogether—and provides a convincing and remarkably straightforward explanation for the dramatic differences in hours worked. It is an explanation that has far-reaching implications for policymakers—and for anyone else who's ever received a paycheck. According to Prescott, the reason for these large differences in labor supply is not culture. “French, Japanese, and U.S. workers all have similar preferences,” he writes. “The French are not better at enjoying leisure. The Japanese are not compulsive savers.” The reason for the wide range in working hours is, in a word, taxes. Europeans supply less labor because there's a much larger wedge in most European countries between what a worker is paid and what that worker actually gets to keep after taxes are taken out. This tax wedge, argues Prescott, distorts the trade-off people make between consumption and leisure by making consumption more expensive. And since people work, ultimately, to earn money to pay for consumption goods, they'll supply less labor if consumption goods become relatively more expensive. The cheaper alternative: leisure. Hello, Riviera. If the concept seems straightforward, its evolution was anything but. Like most ideas that seem obvious in retrospect, the awareness that taxes distort labor markets dramatically and account for major international differences in work patterns came about indirectly and as a revelation to those who happened upon it. The discovery Prescott's discovery about the role of taxes in labor supply variation began, simply enough, in his classroom at the University of Minnesota, where he taught from 1980 to 2003. “I was making up exercises for my students,” he recalled in a recent interview. “I said, 'use this nice little growth model.'” The “nice little model” he presented to his students is the workhorse of modern macroeconomics; it says, mathematically, that a nation's total output (or gross domestic product, GDP) is dependent on three sources: labor, capital and the efficiency (or productivity) with which it merges them to create economic value. The other key part of this standard theory is, in the jargon of economics, a utility function: a formula representing the notion that households try to maximize their happiness by finding the best possible combination of leisure and consumption, given their resources. Prescott wanted his students to become familiar with this model by looking at how it performed in different nations over time, and how key variables—capital endowments, productivity, labor supply—could account for differences among nations in per capita GDP. “I wanted to try to get across the basic ideas and the importance of productivity,” said Prescott. “And then I thought, let's put a few taxes in.” The intuition was far more significant than Prescott suspected, but that became clear only after looking at the relative contributions of capital, productivity and labor. The data, compiled by the United Nations and the Organization for Economic Cooperation and Development, showed that in the mid-1990s among developed countries—the United States, much of Europe and Japan—relative levels of capital differ little and explain just a small portion of the variation in per capita GDP (see adjacent table). “The capital factor is not an important factor in accounting for differences in incomes across the OECD countries,” writes Prescott in his 2002 Richard T. Ely Lecture to the American Economic Association. “[It] contributes at most 8 percent to the differences in income between any of these countries.” Capital, Labor, Productivity and GDP 1993-96 Country Capital/ Output Ratio (1990) Hours worked per Week per Person 15-64 Productivity: GDP per hour Worked; US=100 GDP per Person 15-64; US=100 Germany 2.7 19.3 99 74 France 2.2 17.5 110 74 Italy 2.6 16.5 90 57 Canada na 22.9 89 79 United Kingdom 2.6 22.8 76 67 Japan 2.5 27.0 74 78 United States 2.3 25.9 100 100 Source: Federal Reserve Bank of Minneapolis Research Department Staff Report 321 and Working Paper 618 . Productivity, on the other hand, is very important, at least for some national differences. Japan and the United States, for example, have similar levels of labor and capital, but per capita GDP in Japan is far below that in the United States because its productivity is less than three-quarters that of the United States. But what of European countries like France, Italy and Germany? Why are their levels of per capita GDP so much lower? All these nations have capital endowments comparable to the United States. Their productivity levels also are similar to U.S. rates, or in the case of France, even higher. The data suggest that the differences in wealth are due almost exclusively to the markedly lower number of hours worked in these European countries. Germany, for instance, had a slightly higher capital endowment than the United States and an equal level of productivity, but just 74 percent of the U.S. per capita GDP. The evident reason: Its workers supplied just over 19 hours of labor per week compared to nearly 26 hours a week per American worker. While many believe that cultural differences lead to fewer hours worked in Europe than in the United States, Prescott doubts it. After all, data from the early 1970s show that the French actually worked more hours per week than did Americans at that time. Has French culture changed radically over the last two decades? Probably not: They still like good wine, aged cheese and, inexplicably, Jerry Lewis. Prescott's hunch was that differences in marginal tax rates might explain the differences in labor supplied and thus account for differences in per capita GDP. Enter the tax wedge “What is important is the price of consumption relative to leisure,” Prescott writes in the lecture he gave in April 2003 as he accepted Northwestern University's prestigious Erwin Plein Nemmers Prize in Economics. “And it is determined by the consumption tax rate and the labor income tax rate.” (See the lecture, “ Why Do Americans Work So Much More Than Europeans? ”) By introducing these taxes into the growth model, and making standard microeconomic assumptions, Prescott derived what he calls “the key equilibrium relation.” 1 It's a mathematical formula for labor supply that says workers will supply labor dependent on, among other things, their preference for consumption now over consumption later (spend or save?), their preference for leisure relative to consumption (play or work?) and the effective tax rate. Holding the first two variables fixed and looking empirically at different national tax rates enables Prescott to see if tax differences can account, fully or partially, for variations in labor hours supplied. Estimating the effective tax rates in these countries was, in itself, a major accounting exercise. Consumption taxes include value-added taxes, sales taxes, excise taxes and property taxes. Labor is subject to both income taxes and Social Security taxes. For each nation under consideration, Prescott and his students crunched the numbers, determined a tax rate, plugged it into the formula along with fixed estimates of the other variables, and derived predictions of labor hours supplied per week per worker. How good were the predictions? Dead-on for Germany and the United Kingdom, a bit low for Canada and the United States, and a bit high for the other countries (see table below). Given measurement inaccuracies, the rough nature of the tax-rate estimates and the difficulty of international comparisons, writes Prescott, the model's predictions were “surprisingly close to the actual.” Tax Rates and Labor Supply 1993-96 Country Tax Rate (percent) Actual Hours Worked per Week per Person 15-64 Predicted Hours Worked per Week per Person 15-64 Difference (Predicted Minus Actual) Germany 59 19.3 19.5 0.2 France 59 17.5 19.5 2.0 Italy 64 16.5 18.8 2.3 Canada 52 22.9 21.3 -1.6 United Kingdom 44 22.8 22.8 0.0 Japan 37 27.0 29.0 2.0 United States 40 25.9 24.6 -1.3 Source: “ Why Do Americans Work So Much More Than Europeans ?” Federal Reserve Bank of Minneapolis Research Department Staff Report 321. Here, notes Prescott, “the important observation is that the low labor supplies in Germany, France and Italy are due to high tax rates. In these countries if someone works more and produces 100 additional euros of output, that individual gets to consume only 40 euros of additional consumption and pays directly or indirectly 60 euros in taxes.” Put in such stark terms, it seems obvious that many Europeans might opt to work less, while Americans and Japanese, taxed more lightly, would be keen to put in extra hours. Confirmation and implications Prescott found further confirmation for his hypothesis when he looked at tax rates and labor supply in the early 1970s (see table below). While his model's predictions of labor hours supplied diverge from the actual in several cases—Italy and Japan, in particular—Prescott observes that “when European and U.S. tax rates were comparable, European and U.S. labor supplies were roughly equal.” Tax Rates and Labor Supply 1970-74 Country Tax Rate (percent) Actual Hours Worked per Week per Person 15-64 Predicted Hours Worked per Week per Person 15-64 Difference (Predicted Minus Actual) Germany 52 24.6 24.6 0.0 France 49 24.4 25.4 1.0 Italy 41 19.2 28.3 9.1 Canada 44 22.2 25.6 3.4 United Kingdom 45 25.9 24.0 -1.9 Japan 25 29.8 35.8 6.0 United States 40 23.5 26.4 2.9 Source: “ Why Do Americans Work So Much More Than Europeans ?” Federal Reserve Bank of Minneapolis Research Department Staff Report 321. As for the outliers, Italy and Japan, Prescott suggests that other factors may be significant. In Italy, cartels may have played a role in depressing labor supply below its predicted value. In Japan, significant measurement errors in actual hours worked could account for the overly high prediction by the model. And what seems another anomaly is very likely an indirect confirmation of the importance of marginal tax rates on labor supply, according to Prescott. In the United States, actual hours worked per person increased by 10 percent from the 1970s to the 1990s, though the marginal tax rate remained at 40 percent. Prescott argues that U.S. tax reforms in the 1980s changed the effective marginal tax faced by married couples—dropping the rate in half for the second earner's income—even though it remained nominally at 40 percent. “In the 1993-96 [period],” he writes, “the marginal income tax on the labor income associated with switching between a one-earner and a two-earner household is only 20 percent, not 40 percent.” The issue warrants more attention, he says, and indeed, his colleagues Larry Jones, Rodolfo Manuelli and Ellen McGrattan have recently released a paper on this exact question. (See “ Wives at Work .”) On the whole, Prescott states, the results show that “people are remarkably similar across countries” and not only for these relatively prosperous and homogeneous nations, but for Chile, Mexico and Argentina, as well, where other economists have found similar relationships. “Apparently, idiosyncratic preference differences average out and result in the [representative] household having almost identical preferences across countries.” The policy implications are enormous for high-tax countries. If France were to lower its effective tax rate from 60 percent to 40 percent, estimates Prescott, its people would work more (taking 6.6 percent less leisure) and—remember their high productivity?—would generate considerably more output. Tax revenues wouldn't diminish, because the 40 percent rate would be levied on a higher base. And overall French “welfare gains,” as economists put it, would increase nearly 20 percent. In the United States, reducing marginal tax rates would have a more modest impact, according to the model: A 10 percent rate reduction would produce a 7 percent welfare gain. But even in the United States, Prescott's findings have huge implications for the viability of the Social Security system. (See “ Shrinking a deadweight loss .”) Foreign affairs In recent months, Prescott has traveled widely, presenting his findings not only to American audiences but to economists and policymakers in London, Berlin, Toulouse, Tokyo and elsewhere overseas. And in fact, says Prescott, Europeans tend to be more receptive than Americans. “The economists there understand that there is a problem,” he said after returning from France in mid-September. “I got some excellent suggestions when I presented the paper, the best so far.” But at all venues, he observes, the common denominator is surprise. Prescott is the first to admit that he, too, thought the results were startling, unexpected. “I find it remarkable that virtually all of the large difference in labor supply between France and the United States is due to differences in tax systems,” he writes in his Ely lecture. “I expected institutional constraints on the operation of labor markets and the nature of the unemployment benefit system to be more important.” Moreover, he concedes that cultural explanations might carry the day in a few settings. “Scandinavians seem to be a little bit different,” he said recently, referring to research by Richard Rogerson, an economist at Arizona State University. “My theory is when one of those Swedes looks at you when you're not working, it's pretty intimidating.” More seriously, he allows that in small, homogeneous cultures, social pressures can be quite strong. But even in large, heterogeneous nations, tax wedges don't always tell the whole story, according to Prescott. “Taxes are not the only reason that the labor factors differ,” says Prescott's Ely lecture. Unemployment benefits and housing subsidies—not taxes—distorted labor mobility in the United Kingdom between the first and second World Wars, contributing significantly to that country's interwar depression. New Deal policies supporting cartels in America's heavy industries distorted wages and employment in the last half of the 1930s, contributing to the depth and duration of the Great Depression in the United States. Similarly, cartels in 1970s Italy may have suppressed employment there. Prescott relies on work by University of California, Los Angeles economists Harold Cole and Lee Ohanian in making these conjectures. Still, while taxes aren't the all-powerful explanatory factor for all nations and eras, Prescott contends that in major developed countries in the time period under consideration, the labor supply impact of tax wedges is a powerful and undeniable fact. Other academics As befits the work of any prominent scholar, Prescott's theory has attracted close academic scrutiny—beyond the initial reaction of surprise—from both adherents and critics. In one recent paper, Peter Lindert, an economist at the University of California, Davis, refers to Prescott's study as dependent upon “a theoretical model heavily laden with assumptions. It is educated, intelligent, plausible fiction—but fiction nonetheless.” On the other hand (as Lindert points out) Prescott's model and findings are cited quite favorably by Nobel Laureate Robert Lucas in his 2003 presidential address to the American Economic Association. Lindert calls for empirical tests. Steven Davis at the University of Chicago Graduate School of Business and Magnus Henrekson of the Stockholm School of Economics oblige with a careful econometric analysis of the impact of labor income and consumption taxes on employment and work activity. In their study of rich countries in the mid-1990s, they find that a 12.8 percentage point difference in tax rates is associated with 122 fewer market work hours per adult per year and nearly a 5 percentage point decrease in employment—population ratios—an indirect affirmation of Prescott's theory. A very different perspective was presented earlier this year in a series of lectures by British economist Richard Layard, co-director of the Centre for Economic Performance at the London School of Economics. Layard takes issue with GDP itself as a satisfactory measure of human welfare—or utility, as Jeremy Bentham and subsequent economists have termed it—noting that “happiness has not increased, despite huge increases in living standards.” To summarize a lengthy argument, Layard's idea is that a tax wedge on labor income could actually increase utility by decreasing a sort of pollution: overwork brought on by the inherent human desire to do better than our peers, regardless of our absolute level of income. Keeping up with the Joneses, in other words, leads to overwork, ill health and unhappiness—rivalry distorts the leisure/labor decision. Appropriate public policy should diminish this pollution by taxing it. “In an efficient economy,” Layard writes, “there will be substantial levels of corrective taxation ... 60 percent would not seem inappropriate, and that is in fact the typical level of marginal taxation in Europe—if you allow for direct and indirect taxes.” Prescott responds Prescott's reactions to these ideas vary widely. Sitting in his seventh-floor office at the Minneapolis Fed, he reads through the first pages of Lindert's paper, then drops it on his desk. “It doesn't seem to be coherent,” he says. Davis and Henrekson's study, on the other hand, intrigues him. That might seem predictable given its broad support of Prescott's findings, but Davis and Henrekson employ a technique Prescott generally scorns: statistical regression. “Progress, don't regress,” he says with a smile, quoting the slogan featured prominently on his Internet home page. Regardless of their method, Prescott is drawn to the findings and has invited Davis to Minneapolis to get a closer look at their work. But Prescott's response to Layard's argument—more complete and nuanced—conveys a sense of Prescott himself. He begins by summarizing Layard's case in a phrase: “I'm happy if I have a lot more income—than you,” he says, grinning and quite aware that he does. As to the overwork such rivalry might cause, “that just says there's a consumption externality.” Then he conveys the concept with a story. “I always tried to create a positive externality in Pittsburgh for my neighbors who had these beautiful lawns,” he jokes of his grad school days at Carnegie Mellon University. “By my having a messy lawn, their lawns looked so much better. I mowed it, but I didn't do much else with my lawn. And it gave me utility to see them happier.” He tells the story with a verbal wink, acknowledging silently that his Pittsburgh yard care externality may well have been less than zero. The conspiratorial smile changes to professorial zeal as he begins to dissect Layard's reasoning: “Suppose everybody cares about relative consumption as well as own consumption. You work out the equilibrium, it's not Pareto optimal. Let's deal with the case where everybody enters symmetrically. So it's simple to make the ordering. Well, you can make everybody better off by just putting a tax on consumption so that they work less. That's a very standard model. Now what would be the empirical evidence for and against that?” In under five minutes, Prescott has crystallized an argument, communicated it to a visitor in plain language and personal anecdote, then converted it to the idiom of economics and laid out steps for its confirmation or refutation. It's vintage Prescott: analytically brilliant, unexpectedly funny and several beats ahead of everyone else. That last bit is the essence of a conversation with the economist. When you ask him a question, it sometimes seems that his reply is off-topic; then it dawns on you that Ed Prescott is answering the question you should have asked. A pattern of surprise Prescott's willingness to entertain alternatives, to listen to critics, to incorporate the unexpected is deeply characteristic of his work. That flexibility is, in fact, the paradoxical outcome of a rigid research discipline. In setting model parameters, for instance, or reporting research results, “the investigator has no degrees of freedom,” he says. “You have to tie your hands and if there's a deviation from your predictions, you report it. You can speculate on why, but you've got to be totally honest.” Intellectual honesty also means allowing findings to modify, even subvert initial hypotheses. It happens frequently, says Prescott. Much of the work for which he's best known—theories on time inconsistency, real business cycles, the equity premium and growth theory—has been developed in an ongoing process of research and revelation. “When I work out the implications, I'm quite often surprised: The findings change my views quite dramatically,” he says. “When I did the real business cycles work with Finn Kydland, I was certain that monetary shocks were the reason the economy fluctuated with the business cycles. Our findings were just the opposite. When I did some work with Rajnish Mehra on the equity premium puzzle, I was certain that the reason for the high historical difference in the return on equity relative to debt was just a premium for bearing aggregate, nondiversifiable risk. We found it wasn't.” For time inconsistency and the impact of taxes on labor supply, as well, surprise has been an intrinsic part of the process. Future direction As striking as his labor supply findings are—and though many aspects of it remain unresolved—Prescott senses that the big theoretical questions in economic growth lie elsewhere, and he is now turning his attention to them. “I think I've had my say on labor supply,” he concludes. In his Ely lecture, he lays out three sources of economic growth: capital, labor and productivity. The first two are important in understanding why some nations remain poor while others prosper, but the central question, contends Prescott, is what determines productivity? “Given productivity, our macro models are great,” he says. “But we treat it as exogenous. We've got to have a better understanding of mapping between policies and productivity.” In other words, what can governments do to enhance productivity? Prescott's main candidates are efficient financial markets, competition among producers and trading clubs. And currently, the last is his major focus. “What is a trading club?” he asks rhetorically. “Well, first, free movement of goods between the member states. But it's much, much more than that. ...” Prescott continues at length, with a discourse ranging from Toyota factories in Wales to trade among the U.S. states in the 19th century. He speaks quickly, and as he does there is a sense that each research question he asks leads him to a dozen more, each more interesting than the last. He will travel soon to Warsaw and then Bogotá to explore these ideas with other economists and policymakers. “It's going to be fascinating to see what's happening in Poland,” he remarks. In Colombia, “the president is trying to do some good things there, and we have to go down and help out.” He's not a policymaker himself. “I leave that to other people,” he says. “I'm no good at it. My comparative advantage is working out implications of theory.” And in so doing, it seems there is just one constraint: Even for Ed Prescott, a scholar who understands labor supply dynamics as well as anyone on earth, there are only 24 hours in a day. “Time,” observes the economist, “is the most valuable resource.” 1 The two assumptions: (1) that people decide between leisure and consumption based on their relative prices, at the margin, and (2) that in a competitive market, wages are equal to their marginal product of labor. The “key equilibrium relation” also depends on the share of a nation's output due to capital. Top of document Advanced Search Glossary See also: Shrinking a deadweight loss