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rise in younger men’s leisure and the corresponding decline in their market hours, or simply
reflected their response to working fewer hours due, say, to reduced labor demand. That
is, has improved leisure technology raised the return to non-market time and consequently
increased the reservation wage of younger men, or are we witnessing movement along a stable
labor supply curve? The idea that changes in household technology shifts the labor supply
curve has a rich history in the literature on increasing female labor force participation. Our
focus is on the role leisure technology plays in the decline of male employment.
To identify shifts in the labor supply curve from movements along a stable labor supply
curve, we introduce a leisure demand system that parallels that typically considered for
consumption expenditures. In particular, we estimate how alternative leisure activities vary
with total leisure time, tracing out “leisure Engel curves.” Our estimation exploits state-year
variations in leisure, such as that caused by differential impact of the Great Recession across
US states. The key identifying assumption is that variations in total leisure at the state level
are not driven by differential changes in preferences or technologies across leisure activities.
We estimate that gaming and recreational computer use is distinctively a leisure luxury
for younger men, but not for other demographic groups. In particular, a one percent increase
in leisure time is associated with a more than 2 percent increase in time spent playing video
games for younger men. Watching TV has an elasticity slightly above one, making it a
modest luxury for younger men, while all other leisure activities have elasticities less than or
equal to one for younger men. This implies that any marginal increase in leisure for younger
men will be disproportionately devoted to computers and gaming.
With the estimated leisure demand system in hand, we quantify the change over time
in the marginal return to leisure based on how leisure’s allocation shifted across activities.
Specifically, we decompose the large increase in recreational computer use between 2004 and
2015 into a movement along the leisure Engel curve due to additional leisure time, and the
shift of the expansion path due to technological improvement in computer and video games
relative to other leisure goods. The estimated Engel curves are what allow us to identify
the increase in recreational computing and video gaming due to more free time from that
induced by a shift in the relative quality of the activity. From this decomposition, we infer
how much the marginal return to leisure increased over time due to improved computer and
video gaming technology. We also document that the relative increase in technology for
computer leisure and video gaming implied from our leisure demand system is consistent
with the relative price decline for computer and video game goods seen in BLS data.
The estimates from the leisure demand system establish that younger men experienced
an increase in the marginal return to leisure. To the extent that agents are on their labor
supply curve, that is, either close to the employment/non-employment margin or with the