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The Elasticity of Substitution Between Time and Market Goods: Evidence from the Great Recession

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  • Aviv Nevo
  • Arlene Wong

Abstract

We document a change in household shopping behavior during the Great Recession. Households purchased more on sale, larger sizes and generic products, increased coupon usage, and shopping at discount stores. We estimate that the returns to these shopping activities declined during the recession and therefore this behavior implies a significant decrease in households’ opportunity cost of time. Using the estimated cost of time and time use data, we estimate a high elasticity of substitution between market expenditure and time spent on non-market work. We find that households smooth a sizable fraction of consumption by varying their time allocation during recessions.

Suggested Citation

  • Aviv Nevo & Arlene Wong, 2015. "The Elasticity of Substitution Between Time and Market Goods: Evidence from the Great Recession," NBER Working Papers 21318, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:21318
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    References listed on IDEAS

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    1. Greenwood, Jeremy & Hercowitz, Zvi, 1991. "The Allocation of Capital and Time over the Business Cycle," Journal of Political Economy, University of Chicago Press, vol. 99(6), pages 1188-1214, December.
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    6. Johannes Stroebel & Joseph Vavra, 2014. "House Prices, Local Demand, and Retail Prices," NBER Working Papers 20710, National Bureau of Economic Research, Inc.
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    8. Loukas Karabarbounis, 2012. "Home Production, Labor Wedges, and International Real Business Cycles," NBER Working Papers 18366, National Bureau of Economic Research, Inc.
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    Citations

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    Cited by:

    1. Gagnon, Etienne & Lopez-Salido, J. David & Sockin, Jason A., 2015. "The Cyclicality of Sales, Regular and Effective Prices: Comment," Finance and Economics Discussion Series 2015-52, Board of Governors of the Federal Reserve System (U.S.).
    2. Chris Stewart & Iris Chan & Crystal Ossolinski & David Halperin & Paul Ryan, 2014. "The Evolution of Payment Costs in Australia," RBA Research Discussion Papers rdp2014-14, Reserve Bank of Australia.
    3. Chen, Natalie & Juvenal, Luciana, "undated". "Quality and the Great Trade Collapse," Economic Research Papers 270016, University of Warwick - Department of Economics.
    4. Johannes Stroebel & Joseph Vavra, 2014. "House Prices, Local Demand, and Retail Prices," NBER Working Papers 20710, National Bureau of Economic Research, Inc.
    5. Luigi Paciello & Andrea Pozzi & Nicholas Trachter, 2013. "Price Dynamics with Customer Markets," EIEF Working Papers Series 1328, Einaudi Institute for Economics and Finance (EIEF), revised Dec 2017.
    6. Anderson, Eric & Malin, Benjamin A. & Nakamura, Emi & Simester, Duncan & Steinsson, Jón, 2017. "Informational rigidities and the stickiness of temporary Sales," Journal of Monetary Economics, Elsevier, vol. 90(C), pages 64-83.
    7. K.E. McConnell & Juha V. Siikamäki & V. Kerry Smith, 2017. "A Strategy for Evaluating the Opportunity Cost of Time Estimates from New Choice Margins," NBER Working Papers 23349, National Bureau of Economic Research, Inc.
    8. Scott Ross Baker & Contantine Yannelis, 2017. "Income Changes and Consumption: Evidence from the 2013 Federal Government Shutdown," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 23, pages 99-124, January.
    9. Nicolas Vincent & Oleksiy Kryvtsov, 2015. "On the Importance of Sales for Aggregate Price Flexibility," 2015 Meeting Papers 46, Society for Economic Dynamics.
    10. Lepage-Saucier, Nicolas, 2016. "The consumption response to temporary layoffs and hours losses," Labour Economics, Elsevier, vol. 41(C), pages 177-193.
    11. Munseob Lee & David Argente, 2015. "Cost of Living Inequality during the Great Recession," 2015 Meeting Papers 1372, Society for Economic Dynamics.
    12. Jean-Pierre Dubé & Günter J. Hitsch & Peter E. Rossi, 2015. "Income and Wealth Effects on Private-Label Demand: Evidence From the Great Recession," NBER Working Papers 21446, National Bureau of Economic Research, Inc.
    13. Rachel Griffith & Martin O'Connell & Kate Smith, 2016. "Shopping Around: How Households Adjusted Food Spending Over the Great Recession," Economica, London School of Economics and Political Science, vol. 83(330), pages 247-280, April.
    14. Laurien Gilbert, 2018. "Gains from Product Variety and the Local Business Cycle," 2018 Meeting Papers 46, Society for Economic Dynamics.
    15. repec:bla:jeurec:v:14:y:2016:i:6:p:1253-1286 is not listed on IDEAS
    16. Kateryna Bornukova, 2015. "Accounting for Labor Productivity Puzzle," BEROC Working Paper Series 26, Belarusian Economic Research and Outreach Center (BEROC).
    17. Jaimovich, Nir & Rebelo, Sérgio & Wong, Arlene, 2015. "Trading Down and the Business Cycle," CEPR Discussion Papers 10807, C.E.P.R. Discussion Papers.
    18. Xu, Yan, 2017. "Essays on preference formation and home production," Other publications TiSEM b028fd7e-53ba-4ff6-97eb-4, Tilburg University, School of Economics and Management.
    19. Rachel Griffith & Rodrigo Lluberas & Melanie Lührmann, 2016. "Gluttony And Sloth? Calories, Labor Market Activity And The Rise Of Obesity," Journal of the European Economic Association, European Economic Association, vol. 14(6), pages 1253-1286, December.
    20. Justine S. Hastings & Jesse M. Shapiro, 2017. "How Are SNAP Benefits Spent? Evidence from a Retail Panel," NBER Working Papers 23112, National Bureau of Economic Research, Inc.
    21. Judith A. Chevalier & Anil K. Kashyap, 2014. "Best Prices: Price Discrimination and Consumer Substitution," NBER Working Papers 20768, National Bureau of Economic Research, Inc.
    22. Oleksiy Kryvtsov & Nicolas Vincent, 2014. "On the Importance of Sales for Aggregate Price Flexibility," Staff Working Papers 14-45, Bank of Canada.
    23. Hansen, G.D. & Ohanian, L.E., 2016. "Neoclassical Models in Macroeconomics," Handbook of Macroeconomics, Elsevier.
    24. Nir Jaimovich, 2015. "The Research Agenda: Nir Jaimovich on The changing nature of business cycles," EconomicDynamics Newsletter, Review of Economic Dynamics, vol. 16(2), November.

    More about this item

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply

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