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

Martin Eichenbaum, Lars Peter Hansen, Kenneth J Singleton

Research output: Contribution to journalArticlepeer-review

297 Scopus citations

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.
Original languageEnglish
Pages (from-to)51-78
JournalQuarterly Journal of Economics
Volume103
DOIs
StatePublished - 1988

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