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Explains the reasons for the longer work hours in the U.S. in comparison with Europe. Average working hours in the U.S. and several European countries; Attitude of U.S. and European workers toward work; Role of taxes in labor supply variation, according to Edward C. Prescott, senior monetary adviser to the Minneapolist Fed and economist at Arizona State University. INSET: Shrinking a deadweight loss.

The article presents a summary of the report "Taxation of Human Capital and Wage Inequality: A Cross-Country Analysis," by Minneapolis visiting scholar Faith Guvenan. It discusses the impact of labor income taxes on determinants of wage inequality, especially on individuals' incentives to build human capital. It also presents data relating to tax policies and inequality in the United States and Europe. It concludes that endogenous labor supply plays an important role for wage inequality when interacted with progressivity.