Łukasz Rachel, Leisure-enhancing technological change, VOX, CEPR Policy Portal, 24 May 2019.
Our time, attention, and data are central in today’s economy. We spend ever more time glued to our screens, while businesses innovate tirelessly to attract ‘eyeballs.’ Clearly, the leisure economy has redefined the way we spend our time. Perhaps less obviously, it has had a profound impact on the macroeconomy.
Economists have studied time allocation decisions at least since the seminal work of Becker (1965). More recently, research noted the decline in average hours worked and the steady rise in leisure hours (Aguiar and Hurst 2007, Boppart and Krusell 2016), and considered the impact of some technologies such as video games on labour market participation (Aguiar et al. 2017). [...]
I focus on leisure-enhancing innovations – services that are supplied free of charge and are designed specifically to draw in viewers. Such innovations make economic sense because the attention they attract can profitably be used for advertising. Building this simple mechanism into a macroeconomic model of innovation-driven growth helps explain some of the salient puzzles observed in the data. The theory explains why so much innovation takes place in the leisure sector, and elucidates the puzzling disconnect between technology, which seems to be racing ahead, and productivity, which is stagnant. It accounts for the rapidly changing time-allocation patterns. It also carries implications for measurement of GDP, and, by highlighting the inefficiencies of market equilibrium, forms a useful framework for thinking about policy.
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