Separability and the Shadow Value of Leisure Time

Douglas M. Larson

American Journal of Agricultural Economics, 1993, vol. 75, issue 3, 572-577

Abstract: Recreation choices are often viewed as short-run decisions conditioned on longer-run labor supply. Using weak separability to reflect this relationship, the wage rate is the shadow value of time for individuals who get no utility from work, whether or not they are observed to be trading time for money in the short run. This result widens the circumstances under which the wage rate (not some fraction thereof) is the theoretically correct shadow value of time. Modifications to such a conclusion are developed for cases in which work is a source of utility and in which the first-stage choice is not continuous.

Date: 1993
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