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Household Production, Leisure, and Living Standards

In: Measuring Economic Sustainability and Progress

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  • Paul Schreyer
  • W. Erwin Diewert

Abstract

Household production is an important non-market activity and the empirical literature has developed different methods towards valuing household production without, however, providing a rigorous theoretical foundation for the various approaches. We follow the literature spawned by Becker (1965) and develop a model of the household as a producer and consumer that provides a theoretical justification for the two main approaches towards valuing labour in household production, the replacement cost approach and the opportunity cost approach. We provide a justification for the replacement cost approach as a way of valuing labour input into own-account production of households but show also that in general this is an incomplete measure of full consumption. We further develop a cost-of-living index for full consumption and full household income. The consequences of the theoretical model are illustrated by a cross-country comparison, using the data by Ahmad and Koh (2011).
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Suggested Citation

  • Paul Schreyer & W. Erwin Diewert, 2014. "Household Production, Leisure, and Living Standards," NBER Chapters,in: Measuring Economic Sustainability and Progress, pages 89-114 National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberch:12826
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    References listed on IDEAS

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    1. Alan B. Krueger & Andreas I. Mueller, 2012. "The Lot Of The Unemployed: A Time Use Perspective," Journal of the European Economic Association, European Economic Association, vol. 10(4), pages 765-794, August.
    2. Robert E. Lipsey & Helen Stone Tice, 1989. "The Measurement of Saving, Investment, and Wealth," NBER Books, National Bureau of Economic Research, Inc, number lips89-1, January.
    3. Pollak, Robert A., 1989. "The Theory of the Cost-of-Living Index," OUP Catalogue, Oxford University Press, number 9780195058703.
    4. Carol Corrado & John Haltiwanger & Dan Sichel, 2005. "Measuring Capital in the New Economy," NBER Books, National Bureau of Economic Research, Inc, number corr05-1, January.
    5. Nadim Ahmad & Seung-Hee Koh, 2011. "Incorporating Estimates of Household Production of Non-Market Services into International Comparisons of Material Well-Being," OECD Statistics Working Papers 2011/7, OECD Publishing.
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    Cited by:

    1. Diewert, Erwin & FOX, Kevin J. & Paul Schreyer, 2017. "The Allocation and Valuation of Time," Microeconomics.ca working papers erwin_diewert-2017-5, Vancouver School of Economics, revised 04 May 2017.
    2. Bridgman, Benjamin, 2016. "Home productivity," Journal of Economic Dynamics and Control, Elsevier, vol. 71(C), pages 60-76.
    3. Diewert, W. Erwin, 2017. "Productivity Measurement in the Public Sector: Theory and Practice," Microeconomics.ca working papers erwin_diewert-2017-1, Vancouver School of Economics, revised 02 Feb 2017.

    More about this item

    JEL classification:

    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E01 - Macroeconomics and Monetary Economics - - General - - - Measurement and Data on National Income and Product Accounts and Wealth; Environmental Accounts

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