Using the Consumption Activities Mail Survey (CAMS) module in the HRS, we document how individual time allocations change when one or more household members transitions from full-time work to not working. We find that the ratio of home production to leisure time is approximately constant for both family members. Using a model of household labor supply to understand the implications of this finding, we conclude that the elasticity of substitution between the leisure of the two members is quite large. This elasticity plays a key role in models of household labor supply and is important for understanding how changes in relative wages and taxes affect household labor supply.

We document two robust features of the cross-sectional distribution of usual weekly hours and hourly wages. First, usual weekly hours are heavily concentrated around 40 hours, while at the same time a substantial share of total hours come from individuals who work more than 50 hours. Second, mean hourly wages are nonmonotonic across the usual hours distribution, with a peak at 50 hours. We develop and estimate a model of labor supply to account for these features. The novel feature of our model is that earnings are nonlinear in hours, with the extent of nonlinearity varying over the hours distribution. Our estimates imply significant wage penalties for people who deviate from 40 hours in either direction, leading to a large mass of people who work 40 hours and are not very responsive to shocks. This has important implications for the role of labor supply as a mechanism for self-insurance in a standard heterogeneous-agent incomplete-markets model and for empirical strategies designed to estimate labor supply parameters.