Household Production, Leisure and Living Standards

Walter Diewert and Paul Schreyer

Economics working papers from Vancouver School of Economics

Abstract: 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).

Keywords: Valuation of household time; replacement cost valuation of time; opportunity cost valuation of time; household production; labour supply; allocation o (search for similar items in EconPapers)
JEL-codes: E01 E21 J22 (search for similar items in EconPapers)
Pages: 22 pages
Date: 2013-04-03, Revised 2013-04-03
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Chapter: Household Production, Leisure, and Living Standards (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:ubc:bricol:erwin_diewert-2013-15

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