A Gift of Time Daiji

A Gift of Time How would people spend time if confronted by permanent declines in market work? We identify preferences off exogenous cuts in legislated standard hours that raised employers’ overtime costs in Japan around 1990 and Korea in the early 2000s. Using time-diaries from before and after these shocks, we estimate the probability that an individual would have been affected by the reform. Reduced-form estimates show that the direct effect on a newlyconstrained worker was a substantial reduction in market time, with the free-up time in Japan reallocated to leisure and personal maintenance, while in Korea the results are mixed, showing some impact on household production. Simulations using GMM estimates of a Stone-Geary utility function defined over time use suggest no effect on household production in either country. Estimation of a household model shows only slight evidence that spouses shared the time gift, nor that one spouse’s allocation of non-market time changed when the other spouse’s market work was permanently and exogenously reduced. NON-TECHNICAL SUMMARY What if people had more time each day – what would they do with it? Cuts in paid work in Japan and Korea resulted from the governments raising employers’ costs of using overtime work. This study shows that those people whose working time we expect to have been cut most did in fact work less than others as compared to the situation before the imposed changes. And they reacted to the drop in work time mostly by increasing their leisure and personal maintenance time (eating, sleeping, etc.) There is very little evidence that the freedup time was used to do chores around the house or spend more time with children. All of this suggests that additional freedom from work will not just lead us to substitute unpaid (household) work for market time, but instead that we would use the extra time in more enjoyable ways. JEL Classification: J22, D13