Market work per person of working age differs widely across the OECD countries and there have been some significant changes in the last forty years. How to explain this pattern? Taxes are part of the story but much remains to be explained. The story favoured by Alesina et al. (2005) is that the nexus of strong unions, generous welfare and social democracy implies both high taxes and pressure in favour of work‐sharing in response to adverse shocks. This is not borne out in Scandinavian countries. Scandinavian trade unions have understood that wage restraint rather than work‐sharing is the way to sustain employment.
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