Beyond GDP: Modelling Labour Supply as a ‘Free Time’ Trade-off in a Multiregional Optimal Growth Model

Valentina Bosetti and Frédéric Ghersi

No 2012.44, Working Papers from Fondazione Eni Enrico Mattei

Abstract: In this paper we develop the standard utility function of a Ramsey-type optimal growth model to account for a ‘market-time’ vs. ‘free-time’ trade-off. To do so, we introduce a free-time preference coefficient that measures the utility gained by deviating from a maximum labour supply defined as the combination of a 95% labour force participation rate for the 20 to 69 year-old population, and 3000 annual working hours (50 effective 60-hour weeks). We calibrate this free-time preference coefficient for 12 world regions on statistical and projected data from the United Nations, the International Labour Organisation and the OECD. We illustrate a prospective use of this modelling development by comparing the consequences of convergence of the free-time preference coefficients of all world regions to the contrasted Western European vs. United States value. Over the 21st century, compared to a business-as-usual trajectory defined by maintained regional disparities in free time preference, convergence to US free time preference induces a 0.3% decrease in global discounted labour market time, but a 4.2% increase in discounted global GDP sustained by a 2.5% increase in primary energy consumption that translates into a 1.7% increase in cumulated CO2-equivalent emissions; convergence to Western European free time preference decreases labour market time by 13.8%, GDP by 11.7%, primary energy consumption by 10.7% and cumulated CO2-equivalent emissions by 9.1%.

Keywords: Ramsey Growth Model; Endogenous Labour Supply. Utility of Leisure; Beyond GDP Welfare Valuation (search for similar items in EconPapers)
JEL-codes: C0 O4 (search for similar items in EconPapers)
Date: 2012-06
New Economics Papers: this item is included in nep-ene and nep-env
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Related works:
Working Paper: Beyond GDP: Modelling Labour Supply as a ‘Free Time’ Trade-off in a Multiregional Optimal Growth Model (2012)
Working Paper: Beyond GDP: Modelling Labour Supply as a 'Free Time' Trade-Off in a Multiregional Optimal Growth Model (2012)
Working Paper: Beyond GDP: Modelling Labour Supply as a "Free Time" Trade-Off in a Multiregional Optimal Growth Model (2012)
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