Happiness and time allocation
AbstractWe consider a resource allocation problem in which time is the principal resource. Utility is derived from time-consuming leisure activities, as well as from consumption. To acquire consumption, time needs to be allocated to income generating activities (i.e., work). Leisure (e.g., social relationships, family and rest) is considered a basic good, and its utility is evaluated using the Discounted Utility Model. Consumption is adaptive and its utility is evaluated using a reference-dependent model. Key empirical findings in the happiness literature can be explained by our time allocation model. Further, we examine the impact of projection bias on time allocation between work and leisure. Projection bias causes individuals to overrate the utility derived from income; consequently, individuals may allocate more than the optimal time to work. This misallocation may produce a scenario in which a higher wage rate results in a lower total utility.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by IESE Business School in its series IESE Research Papers with number D/710.
Length: 38 pages
Date of creation: 09 Sep 2007
Date of revision:
Life satisfaction; Work; Leisure; Social comparison; Adaptation;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-02-02 (All new papers)
- NEP-HAP-2008-02-02 (Economics of Happiness)
- NEP-LAB-2008-02-02 (Labour Economics)
- NEP-LTV-2008-02-02 (Unemployment, Inequality & Poverty)
- NEP-SOC-2008-02-02 (Social Norms & Social Capital)
You can help add them by filling out this form.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Silvia Jimenez).
If references are entirely missing, you can add them using this form.