Household Production, Leisure, and Living Standards
In: Measuring Economic Sustainability and Progress
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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- 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.
- 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.
- Alan B. Krueger & Andreas Mueller, 2008.
"The Lot of the Unemployed: A Time Use Perspective,"
1062, Princeton University, Department of Economics, Industrial Relations Section..
- Pollak, Robert A., 1989. "The Theory of the Cost-of-Living Index," OUP Catalogue, Oxford University Press, number 9780195058703, May.
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