Beyond the Market Designing Nonmarket Accounts for the United States (2005) / Chapter Skim
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3 Home Production
3 Home Production
Pages 55-78
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From page 55... ...
that we know today. He conformed to immediate precedent, declining to include any imputations of the value of household production, but offered eloquent warning of the limitations of the resulting estimates of national income: "The welfare of a 55
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From page 56... ...
. Several national statistical agencies are in the early stages of developing satellite household production accounts.
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From page 57... ...
Indeed, we argue that, in judging the level and composition of national output, anyone who disregards nonmarket product misses a significant part of the picture. Estimates of the value of household production are relevant not only to measures of the level of economic activity and productivity, but also to their trend rates of growth and to their fluctuations over the business cycle.
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From page 58... ...
This chapter focuses on household production of tangible goods and services produced for immediate consumption, together with household production of tangible investment goods, such as the building of a home addition. At one level, care of children should be considered a component of home production.
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From page 59... ...
On balance, the availability of relevant data and the relative simplicity of underlying concepts make the household production account a leading candidate for immediate development. Despite the difficulties outlined here, the theoretical and empirical bases for the inclusion of household production in satellite national accounts on a continuing basis are surely far sounder than was the understanding of accounting for market transactions when the United States made the leap into creating consistent sets of national accounts beginning with data from the 1920s and 1930s.
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From page 60... ...
their production technologies. Otherwise identical households in which household members have higher opportunity costs of time, typically reflected in higher market wages, will be less likely to produce commodities at home and more likely to purchase market substitutes.
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From page 61... ...
The lines I1, I2, and I3 indicate the relative prices of cleaning supplies and adults' time, with the lines being flatter if cleaning supplies are relatively more expensive, and steeper if the opportunity cost of the adults' time is higher. Each tangency of these price lines with an isoquant curve shows the best possible combination of cleaning supplies and time to produce that output of cleanliness.
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From page 62... ...
Since changes in the scope of home production will differ across income groups as their opportunities change, ignoring it in measuring incomes also will bias conclusions about how inequality is changing. 2There is some quantitative evidence that as household members transition into retirement, expenditure on food declines sharply while the amount of time spent on home food production increases.
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From page 63... ...
At the other extreme, the time devoted to replacing one's roof would justifiably be included as household production. Similarly, time spent taking a sick infant to the pediatrician's office is a good candidate for inclusion in a satellite account for household production (or health)
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From page 64... ...
Selective reporting can occur with time diaries as well but, because of the episodic nature of the reporting, the problem should be less severe. In Table 3-2 we list activities that seem to meet the criterion for inclusion in a household production satellite account -- activities that one could readily envision being performed by market substitutes -- and provide estimates of time devoted to them.
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From page 65... ...
HOME PRODUCTION 65 TABLE 3-2 Time Spent in Home Production, by Sex, Marital Status, and Presence of Children, Americans Aged 18 and Older: 1985, in Minutes per Day Married Single Female Male Activity Childrena No Children Children No Children Female Male Household Work Food preparation 70.22 68.63 16.09 18.43 43.46 17.57 Meal cleanup 18.48 21.84 3.84 4.32 11.77 3.48 Cleaning house 53.67 42.91 12.82 13.08 31.93 9.03 Outdoor cleaning 3.64 4.40 11.77 18.65 4.98 8.91 Clothes care 24.76 20.36 2.94 1.99 12.92 3.32 Repairs 3.71 4.98 20.00 17.40 2.61 10.74 Plant, pet care 6.01 8.41 8.37 12.71 5.23 3.76 Other household 14.05 15.03 16.80 15.57 12.15 12.50 Total 194.54 186.56 92.63 102.15 125.05 69.31 Child Care Baby care 25.98 4.10 3.93 0.78 3.01 0.34 Child care 21.19 4.74 6.30 0.69 6.52 0.69 Helping/teaching 4.22 1.23 1.37 0.06 1.31 0.14 Talking/reading 3.39 0.76 1.08 0.63 1.13 0.29 Indoor playing 8.59 2.69 5.30 1.10 1.43 0.82 Outdoor playing 1.22 0.75 1.11 0.94 0.48 0.16 Medical care, child 1.70 0.40 0.29 0.00 0.24 0.00 Other child care 2.66 2.62 0.70 0.80 1.86 1.10 Travel/child care 12.75 3.19 5.87 1.26 3.10 0.44 Total 81.70 20.48 25.95 6.26 19.08 3.98 Obtaining Goods and Services Everyday shopping 31.56 30.89 15.86 17.21 27.69 15.50 Durable/house shopping 1.26 0.66 1.15 0.44 0.62 0.44 Medical appointments 4.27 2.05 2.54 1.78 0.83 0.87 Gov./financial services 1.68 1.83 1.10 1.86 1.54 1.13 Repair services 1.42 0.86 1.69 1.05 1.07 1.83 Other services 2.14 1.89 2.98 1.47 1.90 2.91 Errands 1.99 1.19 2.59 1.22 1.04 1.34 Total 44.32 39.37 27.91 25.03 34.69 24.02 Education Students' classes 1.29 1.02 0.32 1.33 12.04 21.78 Other classes 2.02 1.49 1.56 1.51 2.16 3.27 Homework 1.83 3.29 1.72 1.41 9.06 21.86 Other education 0.33 0.13 0.00 0.13 0.50 1.03 Travel/education 8.62 15.86 3.34 3.78 10.52 1.69 Total 14.09 21.79 6.94 8.16 34.28 49.63 Domestic Crafts 8.62 16.86 3.34 3.79 10.53 1.69 Total, hours per day 5.72 4.75 2.61 2.42 3.73 2.48 a Under 18 years old. NOTE: Sample size = 5,358.
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From page 66... ...
The observation at the beginning of this chapter that accounting for household production is especially important in measuring total productive activity because of women's changing labor force participation is underscored by the clear dominance of women's time in the set of activities that are candidates for inclusion in a household production satellite account. As more detailed, extensive and timely data become available, the measurement of time devoted to home production can be fine tuned.
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From page 67... ...
HOME PRODUCTION 67 TABLE 3-3 Time Spent in Home Production, by Sex, Marital Status, and Presence of Children, Americans Aged 18 and Older: 1998, 2000, and 2001, in Minutes per Day Married Single Female Male Activity Childrena No Children Children No Children Female Male Household Work Food preparation 49.44 40.52 17.94 19.08 25.59 15.68 Meal cleanup 11.47 9.15 3.28 3.82 5.21 1.83 Cleaning house 44.07 31.27 17.40 17.35 19.12 10.99 Outdoor cleaning 6.60 11.00 15.73 28.13 5.39 8.59 Clothes care 28.73 18.12 3.01 4.75 13.61 6.40 Repairs 7.19 4.65 14.77 21.41 4.30 9.68 Plant, pet care 6.13 7.12 3.91 11.48 4.77 3.38 Other household 12.88 19.70 8.58 8.33 7.93 10.82 Total 166.51 141.53 84.62 114.35 85.92 67.37 Child Care Baby care 15.60 0.00 4.27 0.00 3.54 0.09 Child care 40.56 3.13 20.89 1.40 11.17 2.28 Helping/teaching 9.55 0.67 3.39 0.28 1.63 1.43 Talking/reading 5.71 5.16 4.49 0.74 3.61 0.43 Indoor playing 9.20 1.00 10.12 2.75 8.39 1.08 Outdoor playing 3.76 0.14 1.97 1.25 1.74 0.00 Medical care, child 1.20 0.00 0.52 0.00 0.69 0.24 Other child care 8.79 0.80 3.86 1.64 3.83 1.08 Travel/child care 14.41 0.55 7.65 1.46 4.54 1.08 Total 108.78 11.45 57.16 9.52 39.14 7.71 Obtaining Goods and Services Everyday shopping 9.83 11.15 5.52 3.19 6.78 5.33 Durable/house shopping 22.33 24.82 18.29 10.07 19.15 7.84 Medical appointments 10.34 0.98 1.71 2.47 2.86 1.01 Gov./financial services 1.40 0.88 0.56 0.72 0.70 0.77 Repair services 2.38 0.38 2.67 0.84 0.97 0.47 Other services 0.48 5.90 1.38 0.06 2.27 4.55 Errands 1.17 0.87 0.45 0.31 2.17 1.34 Travel/shopping 25.58 23.58 17.94 14.52 19.28 14.47 Total 73.51 68.56 48.52 32.18 54.18 35.78 Education Students' classes 1.38 0.36 1.44 0.26 10.45 14.76 Other classes 3.00 1.10 3.29 1.63 4.24 9.78 Homework 12.13 12.34 18.59 25.04 27.93 32.19 Other education 0.24 0.26 1.36 0.00 0.37 0.00 Travel/education 1.68 0.50 1.23 0.30 3.11 4.35 Total 18.43 14.56 25.91 27.23 46.10 61.08 Domestic Crafts 5.34 10.16 0.98 0.00 1.26 0.08 Total, hours per day 6.21 4.11 3.62 3.05 3.78 2.87 aUnder 18 years old. NOTE: Sample size = 2,696.
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From page 68... ...
Nonetheless, the decisions to be made regarding measurement of time inputs may be the easiest of those required before a set of satellite accounts that includes household production can be constructed. VALUING INPUTS Valuation of the time that household members devote to home production raises further conceptual and practical difficulties.
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From page 69... ...
All quantities of productive household time can be summed and valued at the wage rates of the household members engaged in home production. Indeed, the aggregate amount of time spent in what have been determined to be household production activities could be valued at something close to the national average wage rate.5 One of the several problems with this approach is that some home production is generated by individuals who do not have a market wage -- housewives and househusbands, retirees, some teenagers, and others.
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From page 70... ...
Moreover, as discussed in Chapter 1, there is the further complication that an individual's average wage rate may be a poor proxy for the opportunity cost of an hour devoted at the margin to nonmarket production. An Alternative Approach -- Quality-Adjusted Replacement Cost It should be clear that neither the replacement cost method nor the use of household members' market wage rates are fully satisfactory for valuing time inputs to home production in a satellite account.
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From page 71... ...
. In thinking about the various possible approaches to the valuation of time devoted to home production, it is interesting to note that individuals frequently undertake household production tasks in situations where their market wage exceeds the amount they would need to pay someone else to do the job.
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From page 72... ...
Using the average wage rate method (the opportunity cost approach) , the implied value of household production in this single category was $225 billion in 2002.
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From page 73... ...
Recommendation 3.5: In addition to labor inputs, satellite accounts describ ing household production should include on the cost side the value of capital services (including those of consumer durables) , other services, materials, and energy used in generating home-produced outputs.
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From page 74... ...
In the discussion above we concluded that only time inputs that are obviously devoted to production-activities for which market substitutes are readily available -- should be included in a basic household production account. Rather, the issue here is whether a particular productive household activity contributes to the household's consumption or should instead be treated as an investment activity.
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From page 75... ...
and labor hours. Recommendation 3.7: Any satellite account for household production should include an output-based measure that is derived independently of the input based measure of the value of household production.
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From page 76... ...
In the nonmarket case, there is no conceptual reason that the two valuations should be the same. By suggesting that satellite accounts for household production include independent output- and input-based measures, each based on measures of quantities and prices, we are recommending an approach that allows a more accurate understanding of the value of home production to be obtained than is possible in systems that rely on one of these two approaches alone.
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From page 77... ...
Ideally, whatever approach is chosen for measuring these costs, it should be adhered to for some years, allowing, of course, for occasional reviews and revisions as the nature of household technology changes. Considerable data on market wage rates for different types of market work are available; the difficulty lies with determining the relative efficiency of home and market producers for each activity in the ATUS that can be viewed as productive.
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From page 78... ...
Again, however, we believe these are no more difficult to surmount than were the problems that faced those who constructed the initial versions of the NIPAs. Moreover, undertaking both would provide an illuminating check on the accuracy of the household production satellite account.
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