The economic effects of disability on intrafamilial time allocation: labor supply, self-employment, household production and leisure

Claudia Jones Peck

ISU General Staff Papers from Iowa State University, Department of Economics

Abstract: The economic effects of disability are measured by econometric analysis of the own- and cross-wage effects of reduced marginal productivity when the head of the household is disabled. The trade-offs in intrafamilial time allocation include not only the work/leisure decision, but allow for time to be allocated to self-employment and household production. A measure of the marginal productivity of time is not observable in all activities. However, the general model presented is fitted to data for all individuals--wage earners and others, disabled and able-bodied--to provide empirical estimates of the shadow price of time in all uses. The analyses take into account sample selection bias. Additionally, income and social security taxes are allowed for in the model;The objectives of this study are: (1) to develop a general model of intrafamilial time allocation when the head of the household is disabled, and (2) to fit an empirical specification of the model to a micro data set obtained from the Panel Study of Income Dynamics. The data set was generated by the University of Michigan, with the sample drawn from the national population. The analyses use cross-sectional data from 1971;In general, the own-wage effects for the non-Black head of the household indicate that a decrease in the wage rate reduces the number of hours he allocates to the labor market and increases hours of self-employment, household production and leisure. Cross-wage effects of a decline in the head's wage rate show that the spouse increases work for money and reduces hours in household production and leisure. When the non-Black head of the household experiences reduced marginal productivity due to disability, the spouse substitutes her time in the market for his and he substitutes his time in household production for her home time. For the Black households, the head's own-wage effect indicates that a decline in the wage rate reduces hours of work for money and increases home time and leisure. The cross-wage effect of his reduced marginal productivity reduces hours of work for money and leisure of the spouse and increases her time in household production. For the Black household, reduced marginal productivity of the head results in a reallocation of time by both head and spouse from work for money to household production.

Date: 1981-01-01
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