Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/249864 
Year of Publication: 
2021
Series/Report no.: 
Working Paper No. 2021-28
Publisher: 
Federal Reserve Bank of Atlanta, Atlanta, GA
Abstract: 
Households enjoy utility from activities that require a combination of time and goods. We classify activities into two types: luxuries and necessities. Luxuries (necessities) are activities for which time and expenditure shares rise (decline) with income. We develop and estimate a model with nonhomothetic preferences and find that time and goods are substitutable in producing activities. Activities are also substitutable among themselves. Hence, wage and price changes cause large reallocations of time and expenditures across activities. This effect is quantitatively important for welfare inequality. Since 2003, the rise in the price of leisure luxuries has reduced welfare inequality while the rise in wage dispersion has increased it.
Subjects: 
time allocation
consumption expenditures
luxuries
necessities
activity production
inequality
JEL: 
J22
E21
D11
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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