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Household production, what is it and how do we value it?: An interview with Leslie S. Stratton

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In this week’s Q&A, IZA World of Labor Editor-in-Chief Daniel S. Hamermesh asks Leslie S. Stratton some pertinent questions about issues in her field of interest. Leslie S. Stratton is professor and chair of economics at Virginia Commonwealth University, USA. Her main research interests reside in the interaction between market and nonmarket activities: employment decisions, college enrolment patterns, and household production.

Hamermesh: Household production is clearly important. What are some specific examples of it?
Stratton: Household production is defined differently in different studies. A narrow concentration on food preparation, laundry, and indoor cleaning focuses on tasks that are typically performed by women. Many studies examine only these activities. I believe it is important to account for other services that must be completed regularly by all households, such as shopping and financial management. Expanding the definition of housework further to include tasks regularly performed by men (such as lawn care, DIY home and car maintenance) makes sense in light of the importance economists assign to specialization and the division of labor. However, broadening the analysis of household production activities in many cases means incorporating activities that are at least in part dependent upon other household choices. While everyone has to eat to live, pet care is contingent upon pet ownership, lawn care/gardening on the type of residence, DIY home and car maintenance and repair on home and car ownership, childcare on parental status. 

This concern about linked choices is only one of the complications associated with defining household production; another is the availability of market alternatives. Many household products can be outsourced: maids can be hired to clean homes, meals can be delivered or purchased ready made at the grocery, laundry services are readily available. The prevalence of outsourcing opportunities varies substantially over time and across countries, with the relative costs of outsourcing as compared to in home production being a key determinant. 

A third complication is that some of these household production activities are considered hobbies and bring happiness to those engaging in them above and beyond that derived from consumption of the goods that are produced. My older brother does the vast majority of his own car maintenance and repair because he enjoys doing so. I spend far more time cooking than is necessary because I enjoy cooking. Should baking, sewing, and woodworking be considered household production activities? These hobbies certainly produce goods, but an analysis of the inputs used to produce those goods ignores the process-based utility some individuals derive from the activities themselves. 

Household production is not as simple to define as one might suppose. 

Hamermesh: I agree we should value the contribution of household production. But how do we value it? For example, if I spend three hours fixing a toilet, should we value it as the value of my time for three hours, what it would cost me to hire a plumber who could do the job in 15 minutes, or something else?
Stratton: How one values the contribution of household production depends on the purpose of that valuation. If the purpose is to assess the value of all goods and services produced in a country, then I would support valuing the production using market rates. What would it cost one to purchase an equally good product in the market? If the purpose is to decide whether to produce the product oneself rather than purchase it, it is the value of one’s own time that is relevant. In this case, one would compare its value in that production plus the cost of any goods that must be purchased to complete the project (and the time cost associated with those purchases) with the cost of purchasing the product ready-made. If the individual also enjoys producing the product, that too should be taken into account. 

Hamermesh: I agree people are doing less home production in rich countries than earlier and are buying substitutes in the market. But why?
Stratton: Average incomes are higher by definition in “rich” countries. Higher average incomes translate to a higher opportunity cost of time. As noted above, individuals decide whether to engage in home production activities versus purchase them on the market by weighing the costs and benefits of doing so. Those with a higher opportunity cost of time will find market purchases to be relatively less expensive. Higher income households have long “purchased” home production by hiring servants (think Downton Abbey). 

Hamermesh: You say that preferences also influence decisions about home production. How can we separate out preferences from what we see people actually doing?
Stratton: It is difficult to assess preferences. We are taught in introductory economics classes that interpersonal utility comparisons are not possible. Who can say who prefers cooking more—you or me? There is no common scale to make that assessment. Similarly, it is difficult if not impossible to differentiate between preferences and actions. Just as discrimination is sometimes measured as that component of observed outcomes that is not explained by other factors, so preferences may be inferred when observed outcomes are not well explained by other factors. But, as is the case with the measurement of discrimination, that inference is imperfect at best. 

That said, gender norms in the Western world through much of the 20th century generally dictated that women’s role was in the home, taking care of the house and the children, while men’s was in the labor market, providing their household with income. To the extent that women have been brought up to accept these norms, it is likely that women on average place a greater emphasis on developing skills related to home production and feel those skills are more important for women than for men to acquire. These gender norms may actuate preferences for some women; others may feel those gender norms impose an unwelcome constraint. However, if people violating social norms experience a drop in utility, whether because they themselves feel they have “failed” in some sense or because of the attitudes of others, one could say that social norms drive preferences at least indirectly.

© Leslie S. Stratton

Read Leslie’s full IZA World of Labor article, “The determinants of housework time.