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The Demand for Variety: A Household Production Perspective

  • Reuben Gronau

    (Rosita and Esteban Herczeg Professor of Economics Emeritus, Hebrew University, and research associate, National Bureau of Economic Research)

  • Daniel S. Hamermesh

    (Edward Everett Hale Centennial Professor of Economics, University of Texas at Austin, and research associate, IZA and NBER)

Economists have devoted substantial attention to firms' supply of variety, but little to consumers' demand for variety. Employing the framework of home production, we trace differences in demand to differences in the opportunity costs of activities, associated with investments in human capital. Schooling alters time costs and changes the variety of activities household members choose. Time budgets from Australia, Israel, and West Germany show that higher own and spouses' incomes raise variety (suggesting positive income effects). Education increases variety independent of income and earnings; part of its impact goes beyond a correlation of educational attainment with preferences for variety. Copyright by the President and Fellows of Harvard College and the Massachusetts Institute of Technology.

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Article provided by MIT Press in its journal The Review of Economics and Statistics.

Volume (Year): 90 (2008)
Issue (Month): 3 (August)
Pages: 562-572

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Handle: RePEc:tpr:restat:v:90:y:2008:i:3:p:562-572
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