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Measuring Economic Sustainability and Progress$
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Dale W. Jorgenson, J. Steven Landefeld, and Paul Schreyer

Print publication date: 2014

Print ISBN-13: 9780226121338

Published to Chicago Scholarship Online: May 2015

DOI: 10.7208/chicago/9780226121475.001.0001

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Household Production, Leisure, and Living Standards

Household Production, Leisure, and Living Standards

Chapter:
(p.89) 4 Household Production, Leisure, and Living Standards
Source:
Measuring Economic Sustainability and Progress
Author(s):

Paul Schreyer

W. Erwin Diewert

Publisher:
University of Chicago Press
DOI:10.7208/chicago/9780226121475.003.0005

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 initiated by Becker and Lancaster and we develop a model of the household as 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.

Keywords:   household production, full consumption, opportunity cost, leisure, personal care, labor, labour

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