Abstract
This paper develops a model that generates rising average leisure time and increasing leisure inequality along a path of balanced growth. Households derive utility from three sources: market goods, home goods and leisure. Home production and leisure are both activities that require time and capital. Households allocate time and capital to these non-market activities and supply labor. The dynamics are driven by activity-specific TFP growth and a spread in the distribution of household-specific labor market efficiencies. When the spread is set to replicate the increase in wage inequality across education groups, the model can account for the observed average time series and cross-sectional dynamics of leisure time in the U.S. over the last five decades.
Highlights
The distribution in income, consumption and wealth has received a lot of attention in economics in order to make statements about economic welfare
Whereas leisure time was relatively distributed across educational groups half a century ago, nowadays low skilled individuals enjoy systematically more leisure time
This increase in leisure inequality is partially mirrored in hours worked across skill groups; hours worked of high-skilled individuals decrease slower than for low skilled individuals
Summary
The distribution in income, consumption and wealth has received a lot of attention in economics in order to make statements about economic welfare. Leisure production play an important role in squaring a trend in leisure time with an aggregate balanced growth path This aspect is similar to Ngai and Pissarides (2008), which abstracts from the cross-section facts.. Leisure as an activity that involves time and capital, plays a key role in Vandenbroucke (2009), Kopecky (2011) and Bridgman (2016b) too.5 These papers study both time trends and cross-section facts, but their main mechanism is the falling relative price of leisure capital whereas we emphasize the higher productivity growth for market production.
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