A Strategy for Evaluating the Opportunity Cost of Time Estimates from New Choice Margins

K.E. McConnell, Juha Siikamäki and V. Smith

No 23349, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Information frictions imply it is reasonable to expect the same commodity, in a given location, to sell for different prices at the same time. Aguiar and Hurst (AH) [2007] demonstrate how the search behavior implied by these price differences can be used estimate the opportunity cost of time. Their important insight allows the estimation of time prices over the lifecycle and the evaluation of the impacts of macro shocks on them. We provide the first assessment of the plausibility of this type of search behavior as a window on time prices. AH’s measures of the opportunity cost of time are shadow values that are jointly determined with individuals’ decision to search for bargains. Our analysis overcomes the challenges posed by this endogeneity by exploiting the complementarity between time and some types of market goods and services. We use changes in the expenditures for these goods in response to macro shocks as a basis for evaluating the AH choice margin. Using three different data sources we find that changes in expenditures on recreation related goods and services and time spent recreating are consistent with the AH framework’s assessment of the impact of the Great Recession for the opportunity cost of time.

JEL-codes: D13 D61 D83 E32 (search for similar items in EconPapers)
Date: 2017-04
New Economics Papers: this item is included in nep-mac
Note: EEE EFG PE
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.nber.org/papers/w23349.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:23349

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w23349

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by (wpc@nber.org).