View Full Document

Measurement of Income with Time Use with Applications



View the full content.
View Full Document
View Full Document

8 views

Unformatted text preview:

MEASUREMENT OF INCOME WITH TIME USE WITH APPLICATIONS TO HEDONIC INDICATORS OF HAPPINESS AND MISERY By William D Nordhaus June 2009 COWLES FOUNDATION DISCUSSION PAPER NO 1705 COWLES FOUNDATION FOR RESEARCH IN ECONOMICS YALE UNIVERSITY Box 208281 New Haven Connecticut 06520 8281 http cowles econ yale edu Measurement of Income with Time Use with Applications to Hedonic Indicators of Happiness and Misery 1 William Nordhaus I Measures of Time Use and Social Indicators A Time Use in National Accounting How should time use be included in our accounting frameworks Traditional economic accounts center primarily on market transactions But much of economic activity and in all likelihood much of economic welfare depends upon activities outside of the market place Moreover although we do not yet have economic accounts that incorporate the use of time it is plausible that the economic value of time is the most important single non market input and perhaps also non market output I will consider three issues relating to the use of time in this essay First how might we integrate time into our economic accounts Second are attempts to use hedonic psychology likely to be a fruitful way of valuing time in our economic accounts Third do measures of emotions have the property of interpersonal cardinality that is required to construct quantitative social indicators To begin with it is worth reflecting on the importance of time use for non market economic activity Non market activity consists of activities like education recreation and other uses of leisure time babysitting home production of laundry and similar services along with work related activities like commuting The inputs into these activities consist of non market and market labor capital services and material inputs By far the largest inputs for non market activity are labor time Indeed virtually the entire value added of the non market sectors comes from time inputs while most of the non time inputs are purchased in the market economy Consider the cost of home production such as doing the laundry The total value of such activities consists of the value of purchased market inputs soap washing machines electricity and the like plus the value of the time spent in the activities For This is a preliminary version of a paper presented to the NBER Workshop on Time Use The author is grateful to many participants particularly Alan Krueger for comments 1 1 example doing the family laundry might have total cost of 21 of which 20 1 hour 20 per hour is the value of the time while 1 is the cost of the soap and washingmachine services Virtually all the non market inputs are likely to be time The same story holds for virtually every non market activity the major non market input is labor The one important exception might be the inputs of non market environmental capital clean air clean water public beaches that enter into recreation and health activities These examples suggest that measuring and valuing time use may be the most important single component of non market accounts Up to recently the United States had been particularly laggard with respect to generating comprehensive and periodic time use statistics Fortunately beginning in 2003 the Bureau of Labor Statistics began the collection of a large time use survey for the United States the American Time Use Survey or ATUS 2 In the latest survey year 2006 this survey interviewed 13 000 households annually from the out rotating panel of the Current Population Survey It is currently the only time use survey in the world to be conducted on a continuous basis The ATUS will be an important addition to the U S statistical system and a crucial ingredient in the future construction of augmented accounts In addition there are now harmonized historical data on time use such as the American Heritage Time Use Study AHTUS 3 The time of time use studies has arrived B Two Approaches to Quantitative Indicators on Time Use In developing quantitative social indicators to integrate time use we can consider two fundamentally different approaches The first approach would be to use the methodology of national economic accounting This approach which has been considered in the literature on augmented and non market accounts would add the consumption and production of time to the accounts To implement this strategy we would need to develop a set of prices or values to weight the time consumptions after which time could be added to apples and pears using the standard methodology of economic accounts As I will indicate in the first part of this study while this approach would conform to standards of national economic accounting the data requirements are both theoretically and practically far beyond what is currently available 2 A review of the BLS time use survey is contained at http www bls gov atus home htm 3 The web page containing a description is at http www timeuse org ahtus 2 A second approach which has developed along a parallel track with an entirely different approach to valuation is in the spirit of emotions research This would include overall measures of emotions such as happiness and misery it might also attach emotions to particular activities such as unemployment or the time spent watching television This approach was pioneered by F Thomas Juster and is followed in the study by Alan B Krueger Daniel Kahneman David Schkade Norbert Schwarz and Arthur A Stone hereafter KKSSS 4 This approach uses a completely different approach to measuring the values associated with time uses one based on surveys or other psychometric measurements The second part of this study addresses the potential for use of hedonic psychology and emotions research in constructing quantitative social indicators II Time Accounts Using the Approach of National Economic Accounting This section examines the incorporation of time use into the standard national economic accounts It derives equilibrium conditions for consumer behavior with market and non market consumption along with process or intrinsic values of time in different activities Process values or intrinsic values are terms that are used to represent the preference value of the time itself rather than the things produced by time Using a standard index number approach we show that a full set of accounts has data requirements that are far beyond those that are currently or prospectively available with problems particularly arising for the valuation of time and for measuring technological


Access the best Study Guides, Lecture Notes and Practice Exams

Loading Unlocking...
Login

Join to view Measurement of Income with Time Use with Applications and access 3M+ class-specific study document.

or
We will never post anything without your permission.
Don't have an account?
Sign Up

Join to view Measurement of Income with Time Use with Applications and access 3M+ class-specific study document.

or

By creating an account you agree to our Privacy Policy and Terms Of Use

Already a member?