Working Paper: CEPR ID: DP13995
Authors: Job Boerma; Loukas Karabarbounis
Abstract: During the past two decades, households experienced increases in their average wages and expenditures alongside with divergent trends in their wages, expenditures, and time allocation. We develop a model with incomplete asset markets and household heterogeneity in market and home technologies and preferences to account for these labor market trends and assess their welfare consequences. Using micro data on expenditures and time use, we identify the sources of heterogeneity across households, document how these sources have changed over time, and perform counterfactual analyses. Given the observed increase in leisure expenditures relative to leisure time and the complementarity of these inputs in leisure technology, we infer a significant increase in the average productivity of time spent on leisure. The increasing productivity of leisure time generates significant welfare gains for the average household and moderates negative welfare effects from the rising dispersion of expenditures and time allocation across households.
Keywords: time use; consumption; leisure; productivity; inequality
JEL Codes: D10; E21; J22
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Rising leisure expenditures (D12) | Increased productivity of leisure time (D13) |
| Increasing productivity of leisure time (D13) | Significant welfare gains for the average household (D69) |
| Increasing productivity of leisure time (D13) | Moderating negative welfare effects from rising dispersion of expenditures and time allocation (H31) |
| Mean leisure productivity increase (O49) | Contributing more than 30 log points to mean consumption increases (D12) |
| Mean market productivity increase (O49) | Contributing less than 10 log points to mean consumption increases (D12) |