Feb
7
AirBnB Relies on Home Production (the Non-Taxed, Non-Union Sector)
Sarah Holder has written an excellent piece for CityLab about the effects of AirBnB on local housing prices. I'd like to expand on one piece of her discussion and relate this to the recent literature in economics on misallocation and "wedges" that arise due to taxes and market distortions.
Labor economists model a person's time allocation decision. There are 24 hours in a day and each of us can either work or take leisure. Given our skill set, we can earn a given wage perhaps $20 an hour. If the tax rate is 25% then your after tax hourly pay is $15 an hour and an economist would say that the "price" of an hour of leisure is $15 (opportunity cost).
In Gary Becker's work on household production, time spent at home is not just leisure.
Labor economists model a person's time allocation decision. There are 24 hours in a day and each of us can either work or take leisure. Given our skill set, we can earn a given wage perhaps $20 an hour. If the tax rate is 25% then your after tax hourly pay is $15 an hour and an economist would say that the "price" of an hour of leisure is $15 (opportunity cost).
In Gary Becker's work on household production, time spent at home is not just leisure.
