Fifties car with with high heeled shoes

Economists and social scientists have long been interested in how home and market production are organized. Leisure and home production are central to understanding a wide range of issues related to inequality in living conditions, in addition to differences in income and wealth. How do individuals distribute their time between work and leisure and what role do differences in these play for inequality in living conditions? 

This project uses new data to answer these classic questions based on a tax change - the so-called RUT deduction - that was introduced on July 1, 2007. The reform entailed a 50% subsidy of the labor cost for domestic services. One consequence of the reform is that there is now a unique dataset which contains third-party reported consumption of housing services, which otherwise is generally measured using surveys that have issues with selection and measurement error. The project will use the RUT data to analyze how demand for RUT services depends on the characteristics of individuals. By buying household services, people can increase their available time. A demand analysis will then be used to estimate different individuals valuation of their leisure time. By analyzing the variation in people's reactions to RUT, elasticities for labor supply for different types of individuals can also be estimated. Finally, the project will study how inequality measures change when one takes into account differences in leisure and home work and the distribution effects of the RUT reform.

The grant will fund the project over 3 years and will cover the cost of buying Swedish administrative data about RUT and hiring a research assistant to work on the data.