Leisure time and the Sectoral Composition of Employment

In the second half of the twenty century we observe two important patterns of structural change; …rst, a large shift of employment from the agriculture and manufacturing sectors to the service sector, and, second, an increase in leisure time. We relate these two patterns of structural change by arguing that during leisure time we consume recreational services. The observed increase in leisure time then implies an increase in the consumption of these services, which introduces a new mechanism of structural change. In order to measure the impact of this mechanism, we construct a multi-sector exogenous growth model with biased technological change. The new feature of the model is the introduction of recreational activities, which depend on both leisure time and on the consumption of recreational services. We introduce these activities by assuming a non-homothetic nested CES utility function. The model explains the two patterns of structural change. We also show that the introduction of these activities improves the performance of the numerical simulations. We conclude that the increase in recreational activities is an important feature of structural change. 

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