《《eScholarship UC item Happiness and Time Allocation》.pdfVIP

Anderson Graduate School of Management – Decisions, Operations, and Technology Management UC Los Angeles Title: Happiness and Time Allocation Author: Baucells, M. Sarin, R. K. Publication Date: 06-01-2007 Series: Recent Work Publication Info: Recent Work, Decisions, Operations, and Technology Management, Anderson Graduate School of Management, UC Los Angeles Permalink: /uc/item/1fn1v5cv Abstract: We consider a resource allocation problem in which time is the principal resource. Utility is derived from time-consuming leisure activities, as well as from consumption. To acquire consumption, time needs to be allocated to income generating activities (i.e., work). Leisure (e.g., social relationships, family and rest) is considered a basic good, and its utility is evaluated using the Discounted Utility Model. Consumption is adaptive and its utility is evaluated using a reference-dependent model. Key empirical findings in the happiness literature can be explained by our time allocation model. Further, we examine the impact of projection bias on time allocation between work and leisure. Projection bias causes individuals to overrate the utility derived from income; consequently, individuals may allocate more than the optimal time to work. This misallocation may produce a scenario in which a higher wage rate results in a lower total utility. eScholarship provides open access, scholarly publishing services to the University of California and delivers a dynamic research platform to scholars worldwide.