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A Time Series Analysis of Representative Agent Models of Consumption and Leisure Choice Under Uncertainty

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  • Martin S. Eichenbaum
  • Lars Peter Hansen
  • Kenneth J. Singleton

Abstract

This paper investigates empirically a model of aggregate consumption and leisure decisions in which utility from goods and leisure is nontime-separable. The nonseparability of preferences accommodates intertemporal substitution or complementarity of leisure and thereby affects the comovements in aggregate compensation and hours worked. These cross-relations are examined empirically using postwar monthly U. S. data on quantities, real wages, and the real return on the one-month Treasury bill. The estimated values of the parameters governing preferences differ significantly from the values assumed in several studies of real business models. Several possible explanations of these discrepancies are discussed.

Suggested Citation

  • Martin S. Eichenbaum & Lars Peter Hansen & Kenneth J. Singleton, 1988. "A Time Series Analysis of Representative Agent Models of Consumption and Leisure Choice Under Uncertainty," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 103(1), pages 51-78.
    • Handle: RePEc:oup:qjecon:v:103:y:1988:i:1:p:51-78.
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    References listed on IDEAS

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