Effects of wage shocks and saving changes on leisure time: The role of dynamic intra-household commitment

The ability of spouses to commit to future behaviors has important implications for the design of policy interventions targeting specific household members. Using longitudinal data from the Japanese Panel Survey of Consumers (1993-2019), we find robust evidence consistent with limited commitment: positive own past wage shocks increase current leisure, while positive current husband wage shocks reduce the wife’s leisure. Additionally, changes in the wife’s private savings have lasting negative effects on the husband’s leisure time, as limited commitment predicts. These findings extend previous tests of commitment and underscore the importance of accounting for historical changes in the household’s economic environment.