Block Recursiveness of the Household Production Model Under Risk

Raul Fabella

No 198406, UP School of Economics Discussion Papers from University of the Philippines School of Economics

Abstract: Block-recursiveness of the household production model is a convenient property to have in the analysis of household production relations. We show here that, with perfectly competitive rural markets, block-recursiveness holds when production risk is additive but not when it is multiplicative. Block-recursiveness does not hold under price risk, additive or otherwise. This has some troubling implications for approaches that require homogeneous functions.

Date: 1984-05
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Published as UPSE Discussion Paper No. 1984-06, May 1984

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