Authors: Frederic Ghersi, Valentina Bosetti

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 derived from deviating from a maximum labour supply defined by 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. Finally we illustrate a prospective implementation of this modelling development by comparing the consequences of convergence of the free-time preference coefficients of 12 world regions to the contrasted Western European vs. United States value over the 21st century.

The research leading to these results have received funding from the European Union Seventh Framework Programme (FP7/2007/2013) under the grant agreement n° 244766 – PASHMINA.

This seminar has been jointly organized by FEEM and IEFE, Bocconi University.