IS PRODUCTIVITY ON VACATION? THE IMPACT OF THE DIGITAL ECONOMY ON THE VALUE OF LEISURE

Abstract

Many recent digital innovations (like video games) augment the value of leisure time, which is not captured by Gross Domestic Product. Therefore, the productivity impact of such innovations may be understated. I develop the theoretical foundations for measuring the value of leisure when it is produced using the household’s leisure time and recreational durable goods. I apply this framework to estimate the value of US leisure from 1948 to 2016. While the value of leisure is large, it has become less important over time. I find that productivity growth of leisure time has slowed in the digital era. Household stocks of digital goods are small, so have relatively little impact on leisure value. I conclude that mismeasurement due to household digital goods is not a first-order cause of the recent productivity slowdown.