THE ELASTICITY OF SUBSTITUTION BETWEEN TIME AND MARKET GOODS: EVIDENCE FROM THE GREAT RECESSION

Aviv Nevo and Arlene Wong

International Economic Review, 2019, vol. 60, issue 1, 25-51

Abstract: We document a change in household shopping behavior during the Great Recession. Households purchased more on sale, larger sizes, and generic products and increased coupon usage and shopping at discount stores. We estimate a decline in returns to shopping during the recession. Therefore, the increase in shopping behavior implies a significant decrease in households' opportunity cost of time. Using the estimated cost of time and time use data, we estimate a high elasticity of substitution between market expenditure and time spent on nonmarket work. We find that households smooth a sizable fraction of consumption by varying their time allocation during recessions.

Date: 2019
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https://doi.org/10.1111/iere.12343

Related works:
Working Paper: The Elasticity of Substitution Between Time and Market Goods: Evidence from the Great Recession (2015)
Working Paper: The Elasticity of Substitution Between Time and Market Goods: Evidence from the Great Recession (2014)
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