The Elasticity of Substitution between Time and Market Goods: Evidence from the Great Recession

48 Pages Posted: 6 Jul 2015

See all articles by Aviv Nevo

Aviv Nevo

Northwestern University - Department of Economics; National Bureau of Economic Research (NBER)

Arlene Wong

Northwestern University - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: July 2015

Abstract

We document a change in household shopping behavior during the Great Recession. Households purchased more on sale, larger sizes and generic products, increased coupon usage, and shopping at discount stores. We estimate that the returns to these shopping activities declined during the recession and therefore this 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 non-market work. We find that households smooth a sizable fraction of consumption by varying their time allocation during recessions.

Suggested Citation

Nevo, Aviv and Wong, Arlene, The Elasticity of Substitution between Time and Market Goods: Evidence from the Great Recession (July 2015). NBER Working Paper No. w21318. Available at SSRN: https://ssrn.com/abstract=2626992

Aviv Nevo (Contact Author)

Northwestern University - Department of Economics ( email )

2003 Sheridan Road
Evanston, IL 60208
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Arlene Wong

Northwestern University - Department of Economics ( email )

2003 Sheridan Road
Evanston, IL 60208
United States

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