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Does Home Production Drive Structural Transformation?

Author

Listed:
  • Alessio Moro
  • Solmaz Moslehi
  • Alessio Moro

Abstract

Using new home production data for the U.S., we estimate a model of structural transformation with a home production sector, allowing for both non-homotheticity of preferences and differential productivity growth in each sector. We report three main findings. First, the data support a specification with a different income elasticity of market and home services. Second, the non-homotheticity can account alone for the decline in the home services share, while non-homotheticity and price effects together are responsible for the rise of market services. Third, the slowdown in home labor productivity, started in the late 70s, is a key determinant of the late acceleration of the share of market services. We use the estimated model to run a counterfactual experiment and find that, by keeping the growth rate of home labor productivity as before 1978, the model displays a share of market services in consumption expenditure lowered by 6.9% in 2010.

Suggested Citation

  • Alessio Moro & Solmaz Moslehi & Alessio Moro, 2015. "Does Home Production Drive Structural Transformation?," Monash Economics Working Papers 20-15, Monash University, Department of Economics.
  • Handle: RePEc:mos:moswps:2015-20
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    File URL: http://www.buseco.monash.edu.au/eco/research/papers/2015/2015structuralandhomemoromoslehitanaka.pdf
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    References listed on IDEAS

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    1. Bridgman, Benjamin & Duernecker, Georg & Herrendorf, Berthold, 2018. "Structural transformation, marketization, and household production around the world," Journal of Development Economics, Elsevier, vol. 133(C), pages 102-126.
    2. Jushan Bai & Pierre Perron, 1998. "Estimating and Testing Linear Models with Multiple Structural Changes," Econometrica, Econometric Society, vol. 66(1), pages 47-78, January.
    3. J. Steven Landefeld & Stephanie H. McCulla, 2000. "Accounting For Nonmarket Household Production Within A National Accounts Framework," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 46(3), pages 289-307, September.
    4. Bruce E. Hansen, 2001. "The New Econometrics of Structural Change: Dating Breaks in U.S. Labour Productivity," Journal of Economic Perspectives, American Economic Association, vol. 15(4), pages 117-128, Fall.
    5. Miguel A. León-Ledesma & Peter McAdam & Alpo Willman, 2010. "Identifying the Elasticity of Substitution with Biased Technical Change," American Economic Review, American Economic Association, vol. 100(4), pages 1330-1357, September.
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    7. McGrattan, Ellen R & Rogerson, Richard & Wright, Randall, 1997. "An Equilibrium Model of the Business Cycle with Household Production and Fiscal Policy," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 38(2), pages 267-290, May.
    8. Dürnecker, Georg & Herrendorf, Berthold, 2014. "On the Allocation of Time," Working Papers 14-09, University of Mannheim, Department of Economics.
    9. repec:red:issued:14-38 is not listed on IDEAS
    10. Michelle Rendall, 2018. "Female Market Work, Tax Regimes, and the Rise of the Service Sector," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 28, pages 269-289, April.
    11. Ramey, Valerie A., 2009. "Time Spent in Home Production in the Twentieth-Century United States: New Estimates from Old Data," The Journal of Economic History, Cambridge University Press, vol. 69(01), pages 1-47, March.
    12. Berthold Herrendorf & Richard Rogerson & ?kos Valentinyi, 2013. "Two Perspectives on Preferences and Structural Transformation," American Economic Review, American Economic Association, vol. 103(7), pages 2752-2789, December.
    13. Alessio Moro, 2015. "Structural Change, Growth, and Volatility," American Economic Journal: Macroeconomics, American Economic Association, vol. 7(3), pages 259-294, July.
    14. Bridgman, Benjamin, 2016. "Home productivity," Journal of Economic Dynamics and Control, Elsevier, vol. 71(C), pages 60-76.
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    Citations

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    Cited by:

    1. Benjamin Bridgman, 2016. "Engines of Leisure," BEA Working Papers 0137, Bureau of Economic Analysis.
    2. repec:ctl:louvde:v:83:y:2017:i:4:p:379-420 is not listed on IDEAS
    3. Duval-Hernandez, Robert & Fang, Lei & Ngai, L. Rachel, 2017. "Taxes and Market Hours: The Role of Gender and Skill," FRB Atlanta Working Paper 2017-8, Federal Reserve Bank of Atlanta.
    4. Bridgman, Benjamin & Duernecker, Georg & Herrendorf, Berthold, 2018. "Structural transformation, marketization, and household production around the world," Journal of Development Economics, Elsevier, vol. 133(C), pages 102-126.
    5. Jaime Alonso-Carrera & María Jesús Freire-Serén & Xavier Raurich, 2017. "Anatomizing the Mechanics of Structural Change," UB Economics Working Papers 2017/360, Universitat de Barcelona, Facultat d'Economia i Empresa, UB Economics.
    6. Alessio MORO & Solmaz MOSLEHI & Satoshi TANAKA, 2017. "Marriage and Economic Development in the Twentieth Century," JODE - Journal of Demographic Economics, Cambridge University Press, vol. 83(4), pages 379-420, December.
    7. Fabio Cerina & Alessio Moro & Michelle Petersen Rendall, 2016. "The Role of Gender in Employment Polarization," Discussion Papers 1704, Centre for Macroeconomics (CFM), revised Jan 2017.
    8. repec:bpj:bejmac:v:18:y:2018:i:1:p:15:n:15 is not listed on IDEAS
    9. Edgar Cruz & Xavier Raurich, 2018. "Leisure Time and the Sectoral Composition of Employment," UB Economics Working Papers 2018/373, Universitat de Barcelona, Facultat d'Economia i Empresa, UB Economics.
    10. Bridgman, Benjamin, 2016. "Home productivity," Journal of Economic Dynamics and Control, Elsevier, vol. 71(C), pages 60-76.
    11. repec:eee:quaeco:v:64:y:2017:i:c:p:57-66 is not listed on IDEAS
    12. Duval-Hernandez, Robert & Fang, Lei & Ngai, L. Rachel, 2018. "Social subsidies and marketization - the role of gender and skill," LSE Research Online Documents on Economics 87181, London School of Economics and Political Science, LSE Library.
    13. repec:spr:series:v:9:y:2018:i:1:d:10.1007_s13209-017-0164-y is not listed on IDEAS

    More about this item

    JEL classification:

    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure

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