Estimating the Cost of Leisure Time for Recreation Demand Models

In this paper, we propose a method of determining the opportunity cost of leisure time with an empirical recreation demand application. Typically, the opportunity cost of leisure time is assumed to be some fraction of the wage rate. This practice has limitations. First, it assumes that individuals can trade time for money at their wage. Second, it offers no guidance about how to value the time of an individual who is not in the labor force. This paper proposes a method of determining this cost that does not suffer from these drawbacks. An empirical example is provided which demonstrates the proposed approach and contrasts it with commonly applied approaches