Honors Defense Presentation 22/04/2010 09:10:00

← Review of Household Production

• Original definition of household production was based on
the idea that women were much more suited to working
in the home, and not in the market
o The tradeoff between women working in the market

versus the home was too high

 Women take care of the children
 Birth from the women’s body
 The home is the woman’s domain
• However, this idea does not match with today’s society
and family
o Now a common occurrence for women to go to

school
o Women hold jobs

o Babysitting has become a common job

 As such, for the purposes of this paper, the
definition of household production is the
tradeoff between the activities performed by
family members at the cost of participating fully
in the market.
Costs
• Household production does not have an easily measured
time variable.
o Thus, it makes it difficult to put a monetary value on

household production because of the lack of a basic

structure that would organize how to measure time
spent in relation to each household activity
• Opportunity Costs
 o Opportunity costs is the next-best choice available to

someone who has picked between several mutually

exclusive choices.
o The opportunity cost related to the input in the
household changes depending on who is doing the
work
 Ex. The opportunity costs of a CEO who is
washing dishes is higher than a high school
student who is doing the same work
Benefits
• Better creation of economic policies
o How does the home interact with the market

o Able to better predict how social economic policies

will affect the household

• Well-being
o Economists have stated that measuring well-being

based on wealth and material possessions is not

accurate because there are emotional aspects to
well-being that do not rely on either of those
variables.
 Quality of life
o Relative Importance of the household
 In particular, the household is the biggest
influence on human capital. Within the
household, children and other family members
are taught important concepts—such as
timeliness, work ethic, and respect for authority
—that are beneficial to the workforce and
society.
 Directly influences human capital
← Models
• Which model is the most accepted in the literature for
measuring household production?
o The Becker model
 Basic model
 money relies on the market wage rate and
the amount of time spent in the market
 time and money are used in different
markets
• time is thus divided between leisure
and work
 commodities-goods that cannot be
purchased in a store
• effected by human capital because it
is necessary to make the commodity
o increases the effectiveness of
time
 example: secret recipe for
soup
o The opportunity costs model
 Creates a variable that values the opportunity
costs of the home-maker.
 Y can either have a positive or negative effect
on household production
o The market valuation model
 Has basically the same properties as the Becker
model
 However, uses the idea of shadow prices
 Puts an end value that is determined by a
similar job found in the market to the
good
 • Ex: when a mother takes care of child
is may have a shadow price or end
value as if a nanny had done the
same duties
← Findings
• Changing role of women
o The question of including household production in
gross domestic product first stemmed from the belief
that women were not properly recognized in the
work force.
 no longer the case
o As read in The Economist, “women make up the
majority of professional workers in many countries
(51% in the United States, for example).”
o As such, the question why should household
production be measured must be re-analyzed and its
connection to societal well-being redefined
o Change in level of well-being
 UNICEF: “children in rich countries such as
America and Britain had some of the lowest
scores for ‘well-being’.”
 built environment, physical and mental
health, education, recreation and leisure
time, and social belonging
 This decrease in well-being may be correlated
with the tradeoff between the market and the
home.
 “many women choose between
motherhood and careers.”
• Raising a child is very much a full-
time job, and women must perform a
costs and benefit analysis on the
monetary worth of motherhood
 o Men are not leaving the market at a rate that would

balance out the rate of women entering the

• What model is best accepted by the literature and my
findings?
o The opportunity costs model is the most accepted

model to use if measuring household production

 Opportunity costs takes into account the costs
that women face entering the market versus
staying at home
 22/04/2010 09:10:00
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 22/04/2010 09:10:00
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