Finance and Economics Discussion Series

Do Constraints on Market Work Hours Change Home Production Efforts?

Geng Li
2009-21

Abstract: We study variations in housework time and leisure consumption when workers are subject to labor market work hours constraints that prevent them from working the optimal number of hours. Using data from two large nationwide longitudinal surveys, we first document that such constraints are widespread--about 50 percent of all households in our sample had been bound by such constraints in at least one year, highlighting the significance of studying household behaviors in labor markets under binding constraints. Our analysis reveals strong heterogeneity and asymmetry in workers' reactions to this type of market constraint that are difficult to reconcile with standard preferences and home production technology. In particular, we find that the ceilings on market work hours induce workers to increase time spent on housework, including cooking, and to reduce vacation time. In contrast, floors on market work hours do not significantly affect time spent on housework, but may boost vacation time. On net, workers constrained by hours ceilings (floors) appear to have more (less) leisure time. Meanwhile, the response to hours ceilings are more pronounced among unmarried households. We also find some evidence that the magnitude of the effects of market hours constraints increases with the persistence of these constraints. Our results are robust to a number of variations in measurement metrics, econometric specifications, sample selection criteria, and data sources. We argue that the empirical results documented in this paper can be taken as additional moments conditions against which equilibrium models with home production are calibrated.

Keywords: Market hours constraints, home production, leisure time