The link between consumption and leisure under Cobb-Douglas preferences:Some new evidence

Sophocles Brissimis and Alexandros Bechlioulis

MPRA Paper from University Library of Munich, Germany

Abstract: The assumption of multiplicative non-separable (Cobb-Douglas) consumer preferences is a key assumption for analyzing the interdependence of consumption and leisure choices. In this paper we solve the consumer utility maximization problem under these preferences and derive a simultaneous system of two equations corresponding to a static and an inter-temporal equation of consumption and leisure choice. The system is estimated with GMM to obtain consistent estimates of the consumer's preference parameters, of which the relative weight of consumption in the utility function is found to be much higher than that commonly assumed in DSGE model calibration exercises.

Keywords: Cobb-Douglas consumer preferences; consumption and leisure choices; GMM estimation; weight of consumption in utility (search for similar items in EconPapers)
JEL-codes: C36 C61 D12 E44 (search for similar items in EconPapers)
Date: 2017-07-27
New Economics Papers: this item is included in nep-dge, nep-mac and nep-upt
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