Lei Fang, Anne Hannusch, and Pedro Silos
Working Paper 2020-1
January 2020

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We document the large dispersion in hours worked in the cross-section. We account for this fact using a model in which households combine market inputs and time to produce a set of nonmarket activities. To estimate the model, we create a novel data set that pairs market expenditures and time use at the activity level using data from the Consumer Expenditure Survey and the American Time Use Survey, respectively. The estimated model can account for a large fraction of the dispersion of hours worked in the data. The substitutability between market inputs and time within an activity and across a sizable number of activities is key to our results. We show that models that lack these features can only generate one third of the observed hours dispersion.

JEL classification: J22, E21, D11

Key words: time allocation, consumption expenditures, hours dispersion, elasticity of substitution

https://doi.org/10.29338/wp2020-01Off-site link

The authors thank audiences at various conferences and universities for useful comments. They want to especially thank Yongsung Chang, Nicola Fuchs-Sch√ľndeln, Nezih Guner, Karen Kopecky, Dirk Krueger, Rachel Ngai, B. Ravikumar, Richard Rogerson, Chris Tonetti, and Gianluca Violante for feedback at all stages of this project. The views expressed here are those of the authors and not necessarily those of the Federal Reserve Bank of Atlanta or the Federal Reserve System. Any remaining errors are the authors' responsibility. Hannusch gratefully acknowledges financial support by the German Research Foundation (DFG) through CRC TR 224 (project A03).

Please address questions regarding content to Lei Fang, Research Department, Federal Reserve Bank of Atlanta, 1000 Peachtree Street NE, Atlanta, GA 30309-4470, 404-498-8057, lei.fang@atl.frb.org; Anne Hannusch, Department of Economics, University of Mannheim, L7, 3-5 Room P.03, Mannheim, Germany 68161, hannusch@uni-mannheim.de; or Pedro Silos, Department of Economics, Temple University, Ritter Annex 879, 1301 Cecil B. Moore Ave., Philadelphia, PA 19122, pedrosilos@gmail.com.

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