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Abstract:
This paper examines the responses of labor supply, home production, and leisure demand to wage
changes for Japanese married women. The analysis begins with a static model of time allocation and suggests
that the estimated wage effect is positive for market work and negative for housework and leisure.
Moreover, the intertemporal analysis of labor supply indicates that the elasticity of intertemporal substitution
is 0.55. In doing so, the inverse probability weighting method is used to correct for a bias arising
from the selection into employment. An intertemporal model of home production is finally developed
and estimated in a way that preferences are not separable between leisure and home-goods consumption.
Then, the estimated elasticity of intertemporal substitution becomes somewhat smaller. Indeed, a change
in market work is more responsive to a change in leisure than that in housework. The hours of housework
do not vary a lot over the life cycle, conditional on family size. Measurement-error problem can cause
spurious negative (positive) correlation between market work (housework) and hourly wage rate.
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