Working Paper: CEPR ID: DP13554
Authors: Job Boerma; Loukas Karabarbounis
Abstract: We revisit the causes, welfare consequences, and policy implications of the dispersion in households' labor market outcomes using a model with uninsurable risk, incomplete asset markets, and home production. Allowing households to be heterogeneous in both their disutility of home work and their home production efficiency, we find that home production amplifies welfare-based differences meaning that inequality in standards of living is larger than we thought. We infer significant home production efficiency differences across households because hours working at home do not covary with consumption and wages in the cross section of households. Heterogeneity in home production efficiency is essential for inequality, as home production would not amplify inequality if differences at home only reflected heterogeneity in disutility of work.
Keywords: Home Production; Labor Supply; Consumption; Inequality
JEL Codes: D10; D60; E21; J22
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| home production efficiency differences (D13) | inequality in standards of living (I14) |
| home production efficiency differences do not covary with consumption and wages (D13) | home production contributes to inequality (D13) |
| differences in home production efficiency (D13) | greater inequality in standards of living (I14) |
| home production (D13) | welfare implications and policy recommendations are altered (D60) |