Inferring Inequality with Home Production

Job Boerma and Loukas Karabarbounis
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Job Boerma: University of Minnesota

No 157, 2018 Meeting Papers from Society for Economic Dynamics

Abstract: We revisit the causes, welfare consequences, and policy implications of the dispersion in households' labor market outcomes using a model with uninsurable risk, incomplete asset markets, and a home production technology. Accounting for home production amplies welfare-based dierences across households meaning that inequality is larger than we thought. Using the optimality condition that households allocate more consumption to their more productive sector, we infer that the dispersion in home productivity across households is roughly three times as large as the dispersion in their wages. There is little scope for home production to oset dierences that originate in the market sector because productivity dierences in the home sector are large and the time input in home production does not covary with consumption expenditures and wages in the cross section of households. We conclude that the optimal tax system should feature more progressivity taking into account home production.

Date: 2018
New Economics Papers: this item is included in nep-dge
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Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Inferring Inequality With Home Production (2021)
Working Paper: Inferring Inequality with Home Production (2019)
Working Paper: Inferring Inequality with Home Production (2017)
Working Paper: Inferring Inequality with Home Production (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed018:157

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