IDEAS home Printed from https://ideas.repec.org/p/nbr/nberwo/23349.html
   My bibliography  Save this paper

A Strategy for Evaluating the Opportunity Cost of Time Estimates from New Choice Margins

Author

Listed:
  • K.E. McConnell
  • Juha V. Siikamäki
  • V. Kerry Smith

Abstract

Information frictions imply it is reasonable to expect the same commodity, in a given location, to sell for different prices at the same time. Aguiar and Hurst (AH) [2007] demonstrate how the search behavior implied by these price differences can be used estimate the opportunity cost of time. Their important insight allows the estimation of time prices over the lifecycle and the evaluation of the impacts of macro shocks on them. We provide the first assessment of the plausibility of this type of search behavior as a window on time prices. AH’s measures of the opportunity cost of time are shadow values that are jointly determined with individuals’ decision to search for bargains. Our analysis overcomes the challenges posed by this endogeneity by exploiting the complementarity between time and some types of market goods and services. We use changes in the expenditures for these goods in response to macro shocks as a basis for evaluating the AH choice margin. Using three different data sources we find that changes in expenditures on recreation related goods and services and time spent recreating are consistent with the AH framework’s assessment of the impact of the Great Recession for the opportunity cost of time.

Suggested Citation

  • 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.
  • Handle: RePEc:nbr:nberwo:23349 Note: EEE EFG PE
    as

    Download full text from publisher

    File URL: http://www.nber.org/papers/w23349.pdf
    Download Restriction: Access to the full text is generally limited to series subscribers, however if the top level domain of the client browser is in a developing country or transition economy free access is provided. More information about subscriptions and free access is available at http://www.nber.org/wwphelp.html. Free access is also available to older working papers.

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Benjamin Bridgman & Georg Duernecker & Berthold Herrendorf, 2015. "Structural Transformation, Marketization, and Household Production around the World," BEA Working Papers 0128, Bureau of Economic Analysis.
    2. Anderson, Evan W. & McGrattan, Ellen R. & Hansen, Lars Peter & Sargent, Thomas J., 1996. "Mechanics of forming and estimating dynamic linear economies," Handbook of Computational Economics,in: H. M. Amman & D. A. Kendrick & J. Rust (ed.), Handbook of Computational Economics, edition 1, volume 1, chapter 4, pages 171-252 Elsevier.
    3. 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.
    4. Rupert, Peter & Rogerson, Richard & Wright, Randall, 1995. "Estimating Substitution Elasticities in Household Production Models," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 6(1), pages 179-193, June.
    5. Mark Aguiar & Erik Hurst, 2007. "Life-Cycle Prices and Production," American Economic Review, American Economic Association, vol. 97(5), pages 1533-1559, December.
    6. Johannes Stroebel & Joseph Vavra, 2014. "House Prices, Local Demand, and Retail Prices," NBER Working Papers 20710, National Bureau of Economic Research, Inc.
    7. Benhabib, Jess & Rogerson, Richard & Wright, Randall, 1991. "Homework in Macroeconomics: Household Production and Aggregate Fluctuations," Journal of Political Economy, University of Chicago Press, vol. 99(6), pages 1166-1187, December.
    Full references (including those not matched with items on IDEAS)

    More about this item

    JEL classification:

    • D13 - Microeconomics - - Household Behavior - - - Household Production and Intrahouse Allocation
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:23349. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (). General contact details of provider: http://edirc.repec.org/data/nberrus.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.