Economic Theory

, Volume 6, Issue 1, pp 179–193 | Cite as

Estimating substitution elasticities in household production models

  • Peter Rupert
  • Richard Rogerson
  • Randall Wright
Symposium

Summary

Dynamic general equilibrium models that include explicit household production sectors provide a useful framework within which to analyze a variety of macroeconomic issues. However, some implications of these models depend critically on parameters, including the elasticity of substitution between market and home consumption goods, about which there is little information in the literature. Using the PSID, we estimate these parameters for single males, single females, and married couples. At least for single females and married couples, the results indicate a high enough substitution elasticity that including home production will make a significant difference in applied general equilibrium theory.

Preview

Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.

References

  1. Altonji, J. G.: Intertemporal substitution in labor supply: Evidence from micro data. J. Polit. Econ.94, S176-S215 (1986)Google Scholar
  2. Baxter, M., Jermann, J. J.: Household production and the excess volatility of consumption to current income. Manuscript 1994Google Scholar
  3. Becker, G. S.: A theory of the allocation of time. Econ. J.75, 493–517 (1965)Google Scholar
  4. Becker, G. S.: Family economics and macrobehavior. Amer. Econ. Rev.78, 1–13 (1988)Google Scholar
  5. Benhabib, J., Rogerson, R., Wright, R.: Homework in macroeconomics: House-hold production and aggregate fluctuations. J. Polit. Econ.99, 1166–87 (1991)Google Scholar
  6. Braun, R. A., McGrattan, E.: Family labor supply in war and in peace. Manuscript 1994Google Scholar
  7. Canova, F., Ubide, A. J.: Household production and international business cycles. Manuscript 1994Google Scholar
  8. Greenwood, J., Hercowitz, Z.: The allocation of capital and time over the business cycle. J. Polit. Econ.99, 1188–1214 (1991)Google Scholar
  9. Greenwood, J., Rogerson, R., Wright, R.: Household production in real business cycle theory. In: Cooley, T. (ed.) Frontiers of business cycle research. Princeton: Princeton University Press forthcomingGoogle Scholar
  10. Gronau, R.: Home production — a survey. In: Ashenfelter, O. C., Layard, R. (eds.) Handbook of labor economics. Amsterdam: North Holland 1986Google Scholar
  11. Hansen, G. D.: Indivisible labor and the business cycle. J. Monet. Econ.16, 309–327 (1985)Google Scholar
  12. Heckman, J. J., MaCurdy, T. E.: A Life Cycle Model of Female Labor Supply. Rev. Econ. Stud.67, 47–74 (1980)Google Scholar
  13. Hill, M. S.: Patterns of time use. In: Juster, F. T., Stafford, F. P. (eds.) Time, goods and well-being. Ann Arbour: University of Michigan Press 1985Google Scholar
  14. Juster, F. T., Stafford, F. P.: The allocation of time: Empirical findings, behavioral models, and problems of measurement. J. Econ. Lit.29, 471–522 (1991)Google Scholar
  15. Kydland, F. E.: Business cycles and aggregate labor-market fluctuations. In: Cooley, T. (ed.) Frontiers of business cycle research. Princeton: Princeton University Press forthcomingGoogle Scholar
  16. MaCurdy, T. E.: An empirical model of labor supply in a life-cycle setting. J. Polit. Econ.89, 1059–85 (1981)Google Scholar
  17. McGrattan, E., Rogerson, R., Wright, R.: Household production and taxation in the stochastic growth model. Manuscript 1993Google Scholar
  18. Nosal, E., Rogerson, R., Wright, R.: The role of household production in models of involuntary unemployment and underemployment. Can. J. Econ.25, 507–520 (1992)Google Scholar
  19. Osborne, M., Rubinstein, A.: Bargaining and markets. New York: Academic Press 1990Google Scholar
  20. Pollack, R. A., Lundberg, S.: Separate spheres bargaining and the marriage market. J. Polit. Econ.101, 988–1010 (1993)Google Scholar
  21. Rios-Rull, J. -V.: Working in the market, home production, and the acquisition of skills: A general equilibrium approach. Amer. Econ. Rev.83, 893–907 (1993)Google Scholar
  22. Rogerson, R., Rupert, P.: New estimates of intertemporal substitution: The effect of corner solutions for year-round workers. J. Monet. Econ.27, 255–269 (1991)Google Scholar

Copyright information

© Springer-Verlag 1995

Authors and Affiliations

  • Peter Rupert
    • 1
  • Richard Rogerson
    • 2
    • 3
  • Randall Wright
    • 4
    • 3
  1. 1.Federal Reserve Bank of ClevelandClevelandUSA
  2. 2.Department of EconomicsUniversity of MinnesotaMinneapolisUSA
  3. 3.Federal Reserve Bank of MinneapolisUSA
  4. 4.Department of EconomicsUniversity of PennsylvaniaPhiladelphiaUSA

Personalised recommendations