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

Aviv Nevo, Arlene Wong

NBER Working Paper No. 21318
Issued in July 2015
NBER Program(s):Economic Fluctuations and Growth Program, Industrial Organization Program, Monetary Economics Program

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.

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Document Object Identifier (DOI): 10.3386/w21318

Published: Aviv Nevo & Arlene Wong, 2019. "THE ELASTICITY OF SUBSTITUTION BETWEEN TIME AND MARKET GOODS: EVIDENCE FROM THE GREAT RECESSION," International Economic Review, vol 60(1), pages 25-51.

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