3 years ago

THE ELASTICITY OF SUBSTITUTION BETWEEN TIME AND MARKET GOODS: EVIDENCE FROM THE GREAT RECESSION

Aviv Nevo, Arlene Wong

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 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 non‐market work. We find that households smooth a sizable fraction of consumption by varying their time allocation during recessions.

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