Household production function
Consumers often choose not directly from the commodities that they purchase but from commodities they transform into goods through a household production function. It is these goods that they value. The idea was originally proposed by Gary Becker, Kelvin Lancaster, and Richard Muth in the mid-1960s. The idea was introduced simultaneously into macroeconomics in two separate papers by Jess Benhabib, Richard Rogerson, and Randall Wright (1991); and Jeremy Greenwood and Zvi Hercowitz (1991). Household production theory has been used to explain the rise in married female labor-force participation over the course of the 20th century, as the result of labor-saving appliances. More recently with the rise of the DIY or Maker movement household production has become more sophisticated. For example, consumers can now convert plastic wire into high-value products with inexpensive 3-D printers in their own homes.
A simple example of this is baking a cake. The consumer purchases flour, eggs, and sugar and then uses labor, know-how and time producing a cake. The consumer did not really want the flour, sugar, or eggs, but purchased them to produce the cake for consumption (instead of buying it, e.g., from a bakery).
- Muth, Richard F. (1966). "Household Production and Consumer Demand Functions". Econometrica. 34 (3): 699–708. doi:10.2307/1909778. JSTOR 1909778.
- Benhabib, Jess; Rogerson, Richard; Wright, Randall D. (1991). "Homework in Macroeconomics: Household Production and Aggregate Fluctuations". Journal of Political Economy. 99 (6): 1166–1187. doi:10.1086/261796. JSTOR 2937726.
- Greenwood, Jeremy; Hercowitz, Zvi (1991). "The Allocation of Capital and Time over the Business Cycle". Journal of Political Economy. 99 (6): 1188–1214. CiteSeerX 10.1.1.156.835. doi:10.1086/261797. JSTOR 2937727.
- Greenwood, Jeremy; Seshadri, Ananth; Yorukoglu, Mehmet (2005). "Engines of Liberation". Review of Economic Studies. 72 (1): 109–133. doi:10.1111/0034-6527.00326. JSTOR 3700686.
- Emergence of Home Manufacturing in the Developed World: Return on Investment for Open-Source 3-D Printers. Technologies 2017, 5(1), 7; doi:10.3390/technologies5010007
- Becker, Gary S.; Ghez, Gilbert (1975). The Allocation of Time and Goods Over the Life Cycle. New York: Columbia University Press. ISBN 0-87014-514-2.
- Becker, Gary S. (1991) . A Treatise on the Family (Enlarged ed.). Cambridge, MA: Harvard University Press. ISBN 0-674-90698-5. (HUP descr.)
- Becker, Gary S. (1987). "Family". The New Palgrave: A Dictionary of Economics. 2. pp. 281–86.
- Berk, Richard A. (1987). "Household production". The New Palgrave: A Dictionary of Economics. 2. New York: Stockton. pp. 673–75.
- Gronau, Reuben (1986). "Home Production: A Survey". Handbook of Labor Economics. 1. Elsevier. pp. 273–304. doi:10.1016/S1573-4463(86)01007-6.
- Gronau, Reuben (1997). "The Theory of Home Production: The Past Ten Years". Journal of Labor Economics. 15 (2): 197–205. doi:10.1086/209830. JSTOR 2535387.
- Gronau, Reuben (2008). "Household production and public goods". The New Palgrave Dictionary of Economics (2nd ed.). Abstract.
- Pollak, Robert A.; Wachter, Michael L. (1975). "The Relevance of the Household Production Function and Its Implications for the Allocation of Time". Journal of Political Economy. 83 (2): 255–278. doi:10.1086/260322. JSTOR 1830922.
- Schultz, Theodore W., ed. (1974). Economics of the Family: Marriage, Children, and Human Capital. Chicago: University of Chicago Press. ISBN 0-226-74085-4.
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