Thursday, December 20, 2007

Why We Really Have Christmas

So, I think it's fairly well accepted that people have heterogeneous preferences over income and leisure. Unfortunately, employers probably can't have their entire work force taking random days off all the time to sate their own preferences because it really messes up the office - some days you just need the whole team, or a particular person.

The second-best solution? Official holidays. Solving a labour market dilemma. This is even more convincing in that there's generally an option to work at an increased wage as a nod to those with extreme preferences. We could thus interpret the growth of holidays over time (e.g. the recently-announced Family Day in Ontario) as a natural response for more lesiure as society grows richer in following basic economic theory. Note also that richer provinces have a slight tendency towards more holiday time, as would be expected, though the entire variation in the sample stems from the Atlantic provinces. See Wikipedia.

Unfortunately, holidays are extremely sticky and cannot be adjusted easily for sentimental reasons and substantial menu costs. Otherwise we'd have a unique macroeconomic indicator on our hands.

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