Household Production Model and Womens Behavior in the Labour Market

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Table of Contents

Introduction
The time allocation model and effect in household production
Conclusion
Reference
Appendix

Introduction

Household production is the making of services and goods by the members of a household, for their own consumption, using their own capital and their own unpaid labor. The household production goods include food, clothes, beddings, dishes etc.

Despite the fact, on average more than eighty percent of womens time is devoted to non-market activities, little is known about how women allocate time not devoted to paid labor. A cross-country comparison of time allocation in Juster and Stafford in 1991 shows that on average women spend between 24 and 35 hours per week on market work, between 27 and 34 hours on housework, about 70 hours on personal care including sleeping, and between 25 and 42 hours on leisure.

Females in paid working places spend less time on housework and child care than women who are not employed. Juster and Stafford 1991 and SCP 1992 found out that the time men spend on housework is roughly the same in all areas and walks of life, the only exceptions being Sweden, and Japan. Swedish men spend relatively more time on housework, whereas Japanese males do not use a lot of time on the caring for their children or doing housework. The global differences in housework time for females are much smaller than those for men.

A study by the Germany Central Bureau of Statistics on time use shows that men and women devote a similar amount of time to their personal care, eating, and sleeping CBS, 1994. Men and women have about an equal total amount of leisure time at their disposal. Women, however, devote more of their time to household work and looking after the children while men spend more time on the labor market. Household production differ from house to house depending on the size of the family. For example, married people consisting of partners who are both in the labor market, have less leisure time than couples in which only one of the partners, or neither partner, is employed.

On the issue of allocation of time within a household production framework, there are two main approaches according to the household model that can be distinguished. The first intervention involves a specific functional type for the preference structure and household production to derive the time allocation equations. Examples of this approach were formulated by Graham and Green in 1984. In 1987 Kooreman and Kapteyn talked about the different times that different individuals especially a man and a woman spend in both market labor and household production. While Graham and Green in 1984 used a Cobb-Douglas specification for the household production function, while Kerkhofs in 1994 used a more flexible specification in which household production is a linear function of time spent on household activities by husband and wife, the square of these time inputs and the interaction between male and female time inputs in household production. Kooreman and Kapteyn in 1987 used the indirect translog utility function as a specification for their model.

The second concept is used to given functional forms for the equilibrium conditions of the household production model. This approach is taken in Gronau in 1980 and in Kiker and Mendes de Oliveira in 1992. In equilibrium, there is equality for persons who spend time on each activity and do not spend all of their time on one activity between the productivity of work at home, the marginal rate of substitution between leisure and income, and the market wage rate. Gronau in 1980 specifies a functional form for the home production function, from which the equation for work at home is, derived (Gronau, 1986).

Research suggest that in most countries, the value of household production is approximately seventy percent of household income after taxation in their respective countries (this means that, household production is about three-quarters of the income earned by employed women). In houses where there are still young children, the value of household production is about equal to family income after taxation implying that such families work mostly on household production to satisfy their family. For example, it is found that most females with little children, the loss of household production when the woman enters the labor market almost equal the net earnings from paid work, this means that most women will have to spend much of their time and energy at home working on household production than they could spend on the labour market to be paid for their services.

Gronau in 1980 also finds that the value of household production increases with education, therefore the more educated woman become around the world the more they appreciate the value of their families and household production at large but this increase in the value of household production with education is much less than the increase in the market wage with education. Kiker and Mendes de Oliveira in 1992 also find that the returns to formal education in the non-market sector are lower than in the marketplace; however in 1988, Mr. Homan did a research and found that higher educated women spend less time on household production than lower educated women this can be stressed to the point that lower educated woman have no extra thing to do apart from the house chores that awaits them in their homes and residing places. Kiker and Mendes de Oliveira in 1992 further find that there are diminishing returns to non-market production this is mainly because more and more women get education and they place most of their time and energy at their workplace.

The marginal value of the one-thousandth hours of non-market job for women is about sixty five percent of the value of the first hour. Graham and Green in 1984 Conclude from their findings that the elasticity of household production with respect to market goods is higher than the elasticity with respect to the time spent on household production. They also conclude that there are no economies of scale in household production, and that both men and women human capital is more productive in market work than in housework.

In 1987, Kooreman and Kapteyn, find that the presence and age of children have a large effect on the time women spend on the care of children. The availability of children lowers the time used on entertainment and social activities. However, the allocation of time by the husband is hardly affected by the presence of children. In Homan in 1988 and Kerkhofs in 1994, it is also found that the presence of young children has a strong positive effect on home productivity of men and women. In Kerkhofs in 1994, it is further found that for both men and women home productivity increases with age. For females home productivity reduces with education levels attained: highly educated females spend less time on housework and more time on paid work. Homan in 1988 concludes that two of the most important determinants of the allocation of time are the size and life stage of the household. Especially little children increase the amount of time used by men and women on household production (Wicks, 1990).

Substitutional effect in household production: Some activities in the house are more and more intense than others, this will implies that when the wage rate increases the price of those activities that are intense increases also.this will make the activities that are work-intensive to be replaced by the activities that are time-intensive within the household.

An illustration in Graph 1:

The variant B represents a woman who is in labour Market (that is, a woman who is employed and she is working).
While variant A represent a woman who is not in the labour market (a woman who is not employed at any given point) the y-axis presents wage income received.
While the x-axis presents the time applied by different women at their leisure activity time at any a given period that they have.

The graph interpretation is that, since woman A is not employed the she takes is longer than woman B who is employed and earns more according to the graph than A(the distance at the x-axis between the point of origin and where A is situated is longer than the distance between the point of origin and B).

In 1992, a researcher by the name Van der Lippe found out that household work is most evenly distributed between husband and wife when there are no children. The arrival of children generally gives rise to a specialization. Women are therefore forced to apply themselves to housework and care for the children and men run to paid employment outside the house. The presence of children increases household work and child care by women by about 17 hours, while the share of men in these tasks remains about the same since almost all men take the role of breadwinner in the house and therefore they look for paid jobs outside their living areas.

During the past twenty years the amounts of time women spend on housework and child care has decreased, while the amount of time women spend on market work has increased, this has been brought about by the changing technology, globalization and increase in education for women.

Despite this increase, surveys of female labor supply studies show that the number of in the labour market is still very low compared to their male counterparts. Wage elasticity of female labor supply is fairly high, and certainly higher than that of male labor supply for example Theeuwes and Woittiez in 1992 did a survey of wage elasticity of labor supply in The Netherlands. An explanation has been put forward to explain this high wage elasticity is that women have more alternative uses for their time than men; this has been explained and elaborated by Mincer in 1962, 1963. An increase in market remuneration makes men to prefer doing market work, whereas a wage increase leads women to substitute not only leisure but also housework and child care for market work (Killingworth and Heckman 1986).

With regards to the theory of household production, women are more productive at home, relative to their productivity on the labor market, than men. Therefore we connect the individual labour supply to that of the model of time taken by an individual. This implies that we no longer assume that time can be divided simply into two categories, market time and leisure time, but that it can be allocated to more than these two activities. We formulate a household production model including four activities: market work, housework, child care and leisure.

With regards to the theory of household production, in equilibrium there will be equality for women in paid employment between the marginal values of household production, the marginal rate of substitution between child care and consumption, the reservation wage the marginal rate of substitution between consumption and leisure and the market wage rate. For each of these four marginal values we specify a separate equation. From the equilibrium condition we derive the optimal allocation of time between them.

The time allocation model and effect in household production

The model makes an assumption that women can derive utility from three goods: leisure, child care services and other commodities. Commodities are produced by women by combining market goods and time inputs. Child care services are measured in time input by the mother; hence these services are valued through the mothers time only.

Most of the women put their ability to work on two factors, and this are, the time factor and their budget.

Utility maximization yields the equilibrium conditions. These conditions state that in equilibrium the marginal value of housework and the marginal rate of substitution between child care time and consumption by the mother equal the net market wage rate. 2 Moreover, in equilibrium the reservation wage equal the market wage rate. Following Heckman in 1974 and Gronau in 1980, we specify forms for the market wage rate, the reservation wage, the marginal value of housework and the marginal rate of substitution between child care and consumption. From these equations we derive the equations for the time allocation on paid work, housework and child care by the mother.

Time allocation models provide a framework in which the value of household production can be estimated and the division of non-market time into different uses like child-rearing, housework, cooking, washing utensils and washing clothes can be analyzed.

Children have a significant effect on the marginal rate of substitution between child care by the mother and commodities but not on her wage income or on the marginal value of housework. Young children aged between 0 and 3 and between 4 and 5 years decreases the marginal rate of substitution of child care and increase the time spent on child care by the mother. The presence of older children decreases the time spent on child care by the mother. This can occur because women tend to delegate some work to the older children for instance the older children will take care of the younger ones in the house. A child between ages 0 and 3 decreases the marginal rate of substitution of child care by almost two hundred percent, while a child aged 13 or older increases it by one hundred percent.

The estimation findings do not show that there are economies of scale associated with household size. Children have no effect on time spent on housework, but young children do have a major effect on time spent on child care by the mother. The time spent on child care by women with young children apparently goes at the cost of their leisure time, not at the cost of labor supply.

Hours spent in a week on Work and Leisure by Men and Women, Age 25-64.

An hour of paid work raises the reservation wage by almost twelve percent. The inverse of the hours of work coefficient measures the wage effect on hours of paid labor. One percent increase in the hourly wage rate implies that the hours spent on paid employment per week increase by a little less than five minutes. Calculated in the mean value of the actual hours of work variable in 19 hours per week.

In particular the competing choices between job, household work, and leisure in analyzing why the substitution effects for women might be expected to be larger than those for men. The traditional interrupted careers of married women cannot be explained without reference to the shifts in household productivity that takes place when children are born and as they grow older. Labor supply over the life cycle is also affected by the way wages typically vary with age, causing inter-temporal substitution effect.

As forensic economists are well aware, the death or injury of a productive family member results in a substantial economic loss to the remaining members of the household. The real value of the person who has died to his or her to the existing household members cannot be measured with anything. A true fact is that, it is the economic contribution of the person who has died to the household, from the work they do both inside and outside their homes, but that individuals work performance is only known and recorded at his or her place of work, where there are various records of their production within the firm. However, there are various economists who continue to calculate the work performance of an individual within the circumference of their homes or the persons household production. However, the household production of women is not much counted for since it is more than that of men even when calculating using a single household production.

The crime detective literature shows that there are three general approaches for valuing the economic contribution of work in the home. The various methods that economists used to calculate the household production include the wage method, secondly there is direct output method and the third method is the direct output method which involves estimation and summing up of household production functions.

The calculation of household production using the wage quantity:

There are many economists who try to explain how to rate the household production by multiplying the various wages that the various individuals get and the time they spend doing that particular assignment. Classic studies have shown that have used this general approach.

The challenges associated with the housework remunerations methods are seen in three dimensions. First, there is the definite problem of identifying efficient housework remuneration. Some of the economists use the market wage labour to calculate the household production while others use the average wage rate of an individual that is engaged in any household production activity to value the labour unit by unit. ( Gauger & Walker, 1980).

More so, the woman economic contribution in the house is the value of work done within the house but not the value of hours she has spent working in any particular activity. Productivity in the home puts together labor with initial capital and other resources, just as production in the business sector does.

As womens labor wage increases over this period of time, there utility in the market labor also increase making their previously dominant substitution effect declining in importance and they have begun behaving more like men in their labor supply decisions. This therefore means that more women in society have gone to look for employment opportunities in areas where they think they can make a big and positive contribution in the company they are working and the society at large. Moreover, according to the theory of demand, it also depends also on the importance of earning as a source of income. If the total income were held constant then an increase in earnings would create only substitution effects. An example is found in comparisons of the consumption of employed and unemployed women. Unemployed women not only have lower income but also lower forgone costs.

Conclusion

The information availed by few countries to the public about the ability to transform raw material into finished goods and services continues to ignore the unpaid labor and economic output contributed by women and some few men who devote most of their time on household production. At least two over three of the work and economic production of women, half of the worlds adult population, is excluded. There has also been a substantial inference that the important sets of statistics currently used to measure work and valuable production are very incomplete and consequently quite misleading. Opinion of public aspects such as equality, labor market and gender policies, wages and income policies, to name a few, is statistically misinformed. The point is made frequently that the increase in womens participation in paid work leads to overstatement of the increase in measured economic activity, because the reduction in household production is not counted (Nordhaus and Tobin, 1973, Weinrub, 1974). Thus the day to day consideration of measurement of work and production activities is of crucial and important.

Reference

Gronau, R. (1986) Home production a survey, Elsevier science.

Wicks, J. (1990) Determining the value of household output: A comparison of direct and indirect approaches, New York, Economic Series.

Killingworth and Heckman (1986), Analysis of Wage Elasticity, international Business press.

Appendix

The graph interpretation is that, since woman A is not employed she takes is longer than woman B who is employed and earns more according to the graph than A(the distance at the x-axis between the point of origin and where A is situated is longer than the distance between the point of origin and B).

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Household Production Model and Womens Behavior in the Labour Market

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