Munich Personal RePEc Archive

Home Production with Time to Consume

Bednar, William and Pretnar, Nick (2020): Home Production with Time to Consume.

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Abstract

We construct a general equilibrium model with home production where consumers choose how to spend their off-market time using market consumption purchases. The time-intensities and productivities of different home production activities determine the degree to which variation in income and relative market prices affects both the composition of expenditure and market labor hours per worker. When accounting for time to consume, homothetic utility functions can still generate non-linear expansion paths as wages increase. For the United States substitution effects due to relative price changes dominate income effects from wage growth in contributing to the rise in the services share and the fall in hours per worker. Quality improvements to goods and services have roughly kept pace with each other, so that changes to sectoral produc- tion efficiencies are the primary driver of relative price variation.

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