This paper investigates how households determine their time and expenditure allocation. Special attention has been paid to the importance of budget and time constraints for the allocation of resources for learning, entertainment, beauty and barber expenses, travel, social activities, and sports- and health-promotion activities. Specifically, we conducted a unique survey among individuals living in an urban area of Japan to collect information about their resources allocated to various activities. On the basis of the survey, we estimated the allocation equations for time and expenditure pertaining to each activity. The life-cycle profiles for time and expenditure vary across categories, indicating that a different mechanism than the one adopted in the standard life-cycle model of consumption is working behind the scenes, determining time and expenditure allocation for leisure. Our estimation results show that most leisure time and expenditure increase with household income and decrease with labor hours. However, the effects of labor hours on entertainment and social activities exhibit different impacts than others. More concretely, some results of entertainment activities show that time and expenditure are substitute goods. Furthermore, expenditure on social activities increases with labor hours, suggesting that social activities are not separable from labor hours in outside markets.
