Household production and the ealsticity of marginal utility of consumption
2016 (English)Report (Other academic)
Chetty (2006) developed a new method of estimating the Elasticity of Marginal Utility of Consumption (EMUC) from observed work time responses to wage changes and derived an upper bound of 2 for this parameter. Here I show that the omission of household production in Chetty’s model may lead to bias, and perform a numerical sensitivity analysis of Chetty’s results in this respect. I develop a new model that includes household production from which I derive new, unbiased EMUC formulas. I offer empirical estimates based on current evidence of the included parameters, suggesting a lower bound for EMUC of about 0.9.
Place, publisher, year, edition, pages
Stockholm: Centre for Transport Studies , 2016. , 38 p.
, CTS Working paper, 2016:10
Elasticity of marginal utility of consumption, Household production, Labor supply, Coefficient of relative risk aversion, Consumer behavior
Research subject Economics
IdentifiersURN: urn:nbn:se:oru:diva-50393OAI: oai:DiVA.org:oru-50393DiVA: diva2:930550