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

27 Pages Posted: 20 Feb 2019

See all articles by Aviv Nevo

Aviv Nevo

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

Arlene Wong

Princeton University

Multiple version iconThere are 2 versions of this paper

Date Written: February 2019

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.

Suggested Citation

Nevo, Aviv and Wong, Arlene, The Elasticity of Substitution between Time and Market Goods: Evidence from the Great Recession (February 2019). International Economic Review, Vol. 60, Issue 1, pp. 25-51, 2019. Available at SSRN: https://ssrn.com/abstract=3335296 or http://dx.doi.org/10.1111/iere.12343

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

Princeton University ( email )

22 Chambers Street
Princeton, NJ 08544-0708
United States

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