Jim Been, Leiden University - Consumption and Time Use Responses to Unemployment: Implications for the Life Cycle Model

Title: Consumption and Time Use Responses to Unemployment: Implications for the Life Cycle Model

Abstract: In this study we analyze the effects of unemployment on consumption and time use and investigate the implications for the life cycle model. Using Dutch micro panel data on a wide range of expenditure and time use categories, we estimate a small negative effect of unemployment on expenditure, while we estimate large positive effects on time spent on home production and leisure activities. Despite the increase in time spent on leisure, we find no evidence for increased expenditure on leisure activities. In addition, we find no evidence of substitution between expenditure and home production. Applied to an extension of the life cycle model based on Rogerson & Wallenius (2016), our results are consistent with an intertemporal elasticity of substitution below unity and an elasticity of substitution between expenditure and home production of one. We show that the elasticities strongly depend on the expenditure categories considered.

Presenter: Jim Been, Leiden University

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