Responses of Time-Use to Shocks in Wealth During the Great Recession

42 Pages Posted: 21 Jan 2015

See all articles by Jim Been

Jim Been

Leiden University

Michael D. Hurd

RAND Corporation; State University of New York at Stony Brook - College of Arts and Science - Department of Economics; National Bureau of Economic Research (NBER)

Susann Rohwedder

RAND Corporation

Date Written: October 2014

Abstract

Shocks to income and wealth decrease the household’s monetary budget available. As a consequence, households respond by decreasing consumption spending. Income shocks, such as unexpected unemployment and retirement, also increase the time-budget available in addition to decreasing the monetary budget available. Some research has suggested that the additional time available enables households to substitute home production for purchased goods and services, effectively increasing their well-being beyond what a measure of spending would indicate. We aim to expand on this research by using data on time-use with data on categories of spending, which has the potential to be much more informative than data on time-use alone: the combination can show substitutions or complements of time for spending. We use wealth shocks in house values induced by the Great Recession to show the extent to which households adjusted home production in response to those wealth shocks. We found some adjustment in the population age 65 or older, but none in the population age 51-64. This implies that younger households experiencing a wealth shock only find very little opportunity, if any, to buffer the welfare losses resulting from reductions in spending on market-purchased goods by increases in home production. Older households were able to compensate modestly.

Keywords: Income shock, wealth shock, household budget, Great Recession, decreasing consumption, increasing home production, time use

Suggested Citation

Been, Jim and Hurd, Michael D. and Rohwedder, Susann, Responses of Time-Use to Shocks in Wealth During the Great Recession (October 2014). Michigan Retirement Research Center Research Paper No. 2014-313, Available at SSRN: https://ssrn.com/abstract=2552671 or http://dx.doi.org/10.2139/ssrn.2552671

Jim Been

Leiden University

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Michael D. Hurd (Contact Author)

RAND Corporation ( email )

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State University of New York at Stony Brook - College of Arts and Science - Department of Economics ( email )

Stony Brook, NY 11794
United States

National Bureau of Economic Research (NBER)

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Susann Rohwedder

RAND Corporation ( email )

P.O. Box 2138
1776 Main Street
Santa Monica, CA 90407-2138
United States

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