Inferring Inequality with Home Production

73 Pages Posted: 7 Mar 2019 Last revised: 14 May 2021

See all articles by Job Boerma

Job Boerma

University of Oxford - Nuffield Department of Medicine

Loukas Karabarbounis

University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: February 2019

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.

JEL Classification: D10, D60, E21, J22

Suggested Citation

Boerma, Job and Karabarbounis, Loukas, Inferring Inequality with Home Production (February 2019). CEPR Discussion Paper No. DP13554, Available at SSRN: https://ssrn.com/abstract=3346344

Job Boerma (Contact Author)

University of Oxford - Nuffield Department of Medicine ( email )

New Road
Oxford, OX1 1NF
United Kingdom

Loukas Karabarbounis

University of Chicago - Booth School of Business ( email )

5807 South Woodlawn Avenue
Chicago, IL 60637
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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