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Life-Cycle Prices and Production

Author

Listed:
  • Mark Aguiar
  • Erik Hurst

Abstract

We use scanner data and time diaries to document how households substitute time for money through shopping and home production. We document substantial heterogeneity in prices paid for identical goods for the same area and time, with older households shopping the most and paying the lowest prices. Doubling shopping frequency lowers a good's price by 7 to 10 percent. We estimate the shopper's price of time and use this series to estimate an elasticity of substitution between time and goods in home production of roughly 1.8. The observed life-cycle time allocation implies a consumption series that differs markedly from expenditures. (JEL D12, D91)

Suggested Citation

  • Mark Aguiar & Erik Hurst, 2007. "Life-Cycle Prices and Production," American Economic Review, American Economic Association, vol. 97(5), pages 1533-1559, December.
    • Handle: RePEc:aea:aecrev:v:97:y:2007:i:5:p:1533-1559
    Note: DOI: 10.1257/aer.97.5.1533
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    More about this item

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

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    This item is featured on the following reading lists, Wikipedia, or ReplicationWiki pages:
    1. Life-Cycle Prices and Production (AER 2007) in ReplicationWiki
    2. Papers and articles using the American Time Use Survey (ATUS)

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