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Joint estimation of intertemporal labor and consumption decisions: evidence from Spanish households headed by working men

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  • Antonio Cutanda

    (Universidad de Valencia)

  • Juan A. Sanchis-Llopis

    (Universidad de Valencia and ERICES)

Abstract

The aim of this paper is testing the three first-order conditions of an intertemporal optimization model for a representative individual who chooses simultaneously for her level of consumption and leisure, assuming a separable utility function. We estimate these conditions jointly in a system of equations, using a Spanish pseudo-panel data set built by combining the Family Expenditure Survey and the Labor Survey over the period 1987–1997. Our results are in line with previous empirical evidence as regards the elasticity of intertemporal substitution for consumption, as our estimate for this elasticity is between 0.4 and 0.5. Further, we also obtain the first estimate for Spain of the intertemporal elasticity of leisure. This value is above 0.3, and is comparable to other estimates found for other economies.

Suggested Citation

  • Antonio Cutanda & Juan A. Sanchis-Llopis, 2021. "Joint estimation of intertemporal labor and consumption decisions: evidence from Spanish households headed by working men," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 11(4), pages 611-629, December.
    • Handle: RePEc:spr:eurase:v:11:y:2021:i:4:d:10.1007_s40822-021-00176-3
    DOI: 10.1007/s40822-021-00176-3
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    Cited by:

    1. Antonio Cutanda & Juan A. Sanchis-Llopis, 2023. "Human capital and the intertemporal substitution for leisure: empirical evidence for Spain," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 22(3), pages 377-396, September.

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    More about this item

    Keywords

    Euler equation; Instrumental variables; Intertemporal substitution; Panel data;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • C36 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Instrumental Variables (IV) Estimation
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply

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