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Full price elasticities and the value of time: A Tribute to the Beckerian model of the allocation of time

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  • François Gardes

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    (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris)

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    Abstract

    This article adopts Becker's allocation of time framework to describe households' choices concerning both their monetary and time use expenditures in order to propose a new method to derive price elasticity at a micro level. Price and full income elasticities are estimated on a matching of a French Family Budget and a Time Use survey. The utility and home production functions are specified in order to allow the computation of the household's opportunity cost for time, which is shown to be smaller in average than the household's wage net of taxes. This estimate serves to value time dedicated to domestic activities and are used in the definition of full prices. The estimated price elasticities compare well with the estimates by other methods, such as Frisch's model based on independence of preferences assumptions or Hicks-Lewbel's method based on the aggregation of commodities. Finally, the model is applied to the computation of a welfare index, to the estimation of the household's labour supply and to a tentative explanation of the classic difference between cross-section and time-series estimates of income elasticities.

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    Bibliographic Info

    Paper provided by HAL in its series Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) with number halshs-00973418.

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    Date of creation: Feb 2014
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    Handle: RePEc:hal:cesptp:halshs-00973418

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    Keywords: Allocation of time; domestic production; full income; full price; opportunity cost for time; price elasticity;

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    1. Bargain, Olivier & Peichl, Andreas, 2013. "Steady-state labor supply elasticities: A survey," ZEW Discussion Papers 13-084, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    2. Duncan, G.J. & Gardes, F. & Gaubert, P. & Starzec, C., 1998. "A Comparison of Consumption Models Estimated on American and Polish Panel and Pseudo-Panel Data," Papiers du Laboratoire de Microéconomie Appliquée 1998-09, Université Panthéon-Sorbonne (Paris 1).
    3. Alain Trannoy & Nicolas Ruiz, 2008. "Le caractère régressif des taxes indirectes : les enseignements d'un modèle de microsimulation," Économie et Statistique, Programme National Persée, vol. 413(1), pages 21-46.
    4. Deaton, A., 1988. "Quality, Quantity, And Spatial Variation Of Price," Papers 30, World Bank - Living Standards Measurement.
    5. Deaton, Angus, 1974. "A Reconsideration of the Empirical Implications of Additive Preferences," Economic Journal, Royal Economic Society, vol. 84(334), pages 338-48, June.
    6. Marta Zieba, 2009. "Full-income and price elasticities of demand for German public theatre," Journal of Cultural Economics, Springer, vol. 33(2), pages 85-108, May.
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