Quarterly Journal of Economics Vol. 103 No. 1 1988

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

Martin S. Eichenbaum¹; Lars Peter Hansen²; Kenneth J. Singleton³

¹ Carnegie Mellon University · ² University of Chicago · ³ Stanford University

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.

DOI

10.2307/1882642

Volume

103

Issue

1

Pages

51

Sources

crossref openalex

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