Recharging batteries and learning by doing: a behavioral model of labor-leisure choice

While the conventional utility maximization framework neglects the determination of productivity and assumes a trade-off between consumption financed by work and leisure, this paper, drawing on insights from neuroscience and psychology, argues that leisure plays a vital role in maintaining and restoring productivity. Excessive leisure, however, negatively impacts “learning-by-doing” which is necessary for enhancing productivity. This study introduces a novel behavioral model that endogenizes productivity through leisure, formally integrating recovery (recharging one’s batteries) and learning-by-doing into labor-leisure choice, moving beyond its traditional classification as a mere consumption good. Comparative simulations conducted in this study demonstrate that when consumption carries a large weight in the utility function, optimal leisure is much higher in the suggested behavioral model than in the mentioned traditional model, while outcomes converge when leisure outweighs consumption. The model generates quantitative predictions regarding work-leisure allocation and suggests policy implications, such as the potential productivity gains from shorter workweeks or flexible schedules.