Homework in Macoreconomics I: Basic Theory (Part I of II) / Jess Benhabib, Randall Wright, Richard Rogerson.

Format:

Book

Author/Creator:

Benhabib, Jess.

Contributor:

National Bureau of Economic Research.

Wright, Randall.

Rogerson, Richard.

Series:

Working Paper Series (National Bureau of Economic Research) no. w3344.

NBER working paper series no. w3344

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Homework in Macoreconomics I Basic Theory

Homework in Macoreconomics I

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1990.

Summary:

This paper argues that the home, or nonmarket, sector is empirically large, whether measured in terms of the time devoted to household production activities or in terms of the value of home produced output. We also argue that there may be a good deal of substitutability between the market and nonmarket sectors, and that this may be an important missing element in existing macroeconomic models. We pursue this within a framework that labor economists have studied for some time. Symmetrically with the market, household production uses labor and capital to produce a nonmarket consumption good according to a possibly stochastic technology. We show any model with home production is observationally equivalent to another model without home production, but with different preferences. However, for a given set of preferences, incorporating household production can dramatically change the nature and the interpretation of several macroeconomic phenomena. As an example, we show that it is possible to have involuntary unemployment and normal leisure at the same time in models with home production, something that cannot arise in models without it. As another example, we discuss how home production affects the interpretation of models with consumer durables.

Notes:

Print version record

April 1990.