Saving Behavior and the Intergenerational Allocation of Leisure Time

Abstract - We study how the allocation of leisure time affects savings and working time. To do so, we consider a life-cycle model in which leisure and consumption are complementary and individuals decide on the intertemporal allocation of consumption, on leisure time and on its allocation among individuals of the same generation or of a different one. The latter decision margin determines the equilibrium utility services from leisure that individuals obtain in each life time period. We show that economies in which older individuals obtain higher leisure services have higher savings rates, higher stock of capital per worker and higher fraction of time worked. Using data from the World Value Survey, we provide empirical support to these findings.