Working Paper: NBER ID: w12287
Authors: Reuben Gronau
Abstract: Recent years witnessed a flourishing of literature on the implication of shifts from home- production to market production on the macro economy, and in particular, the real business cycle. This literature employs calibration techniques to emulate the fluctuations in market output, labor and capital inputs and productivity over the business cycle, assuming a representative consumer and using stylized parameters of the substitution elasticity between home and market goods, and of the home production function. This paper argues that the parameters used in this literature cannot be verified empirically because of econometric identification problems. Furthermore, using data from the late 90s from transition Russia, it is argued that one cannot capture the fluctuation between the home and the market by using a representative consumer, since there is a distinct difference between males and females in their reaction to loss of employment: men shift most of the time released from market work to leisure while women divide it almost equally between work at home and leisure. Finally it is shown that the switch from a controlled economy to a market economy resulted in significant increase in home productivity and an increase in the free time enjoyed by both Russian men and women.
Keywords: home production; macro economy; transition; Russia; gender differences
JEL Codes: D13; E32; J22
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| transition from a controlled economy to a market economy in Russia (P21) | increase in home productivity (D13) |
| transition from a controlled economy to a market economy in Russia (P21) | increase in leisure time for both men and women (J29) |
| job loss (J63) | shift to leisure for men (J29) |
| job loss (J63) | split time between home work and leisure for women (D13) |
| parameters used in macroeconomic models (elasticity of substitution) (C51) | cannot be empirically verified (B41) |
| new macroeconomic literature (B22) | overlooks nuances in causal relationships (C20) |