Essays on determinants and impacts of preference for leisure

Abstract

This thesis consists of two essays about the determinants and impacts of weight of leisure in preferences. In the first essay, I investigate the determinants of weight of leisure in preferences. First, using a dynamic general equilibrium model, I back out the weight of leisure in preferences for 52 countries over the period from 1950 to 2009. Then, I perform several panel data regressions using the backed out values of the preference for leisure as the dependent variable. Estimation results imply that GDP per-capita, openness and average temperature positively affect the weight of leisure in preferences in a robust manner. I also find some evidence on the effect of unionization on leisure preference. In the second essay, I investigate how weight of leisure in preferences might affect informal sector size. First, I construct a two-sector dynamic general equilibrium model and investigate how the informal sector size in my model varies with respect to weight of leisure in preferences. My model implies that higher weight of leisure in utility relative to consumption increases informal sector size relative to the formal sector. Then, using a panel data framework for 152 countries over 9 years between 1999 and 2007, I also find empirical support for the theoretical implications of the model.