Introducing relations between activities and goods consumption in microeconomic time use models

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Introducing relations between activities and goods consumption in microeconomic time use models

Jara-Díaz, Sergio R. / Astroza, Sebastian / Bhat, Chandra R. / Castro, Marisol

Highlights • Formulation and estimation of microeconomic models for time use with improved treatment of the (technical) relations between goods and time. • Two versions of technical constraints presented: generalized Evans and generalized De Serpa. • System of equations including labor supply, freely chosen activities and freely chosen goods is used to set a stochastic system for econometric estimation through maximum likelihood. • Previous models overestimate values of time. • Segmentation by age, location, income and presence of children.

Abstract We present a microeconomic model for time use and consumption for workers with an improved treatment of the (technical) relations between goods and time. In addition to the traditional time and income constraints, an improved set of restrictions involving explicit relations between consumption of goods and time assigned to activities is included in two versions. In each version, a system of equations involving a subset of the consumer's decision variables is obtained, including (1) work time, (2) activities that are assigned more time than the minimum, and (3) goods that are consumed above the minimum. The system cannot be solved explicitly in the endogenous decision variables but is used to set a stochastic system for econometric estimation through maximum likelihood. The models are applied to analyze weekly time use and consumption data from Netherlands for year 2012. The results obtained by this new ``goods and time'' framework are compared with previous research in terms of the value of leisure and the value of work, showing substantial differences in the valuation of time.