Does Home Production Drive Structural Transformation?

Abstract

Using new home production data for the U.S., we estimate a model of structural transformation with a home production sector, allowing for both non-homotheticity of preferences and differential productivity growth in each sector. We report two main findings. First, the estimation results show that home services have a lower income elasticity than market services. Second, the slowdown in home labor productivity, started in the late 70s, is a key determinant of the rise of market services. Our counterfactual experiment shows that, without the slowdown, the share of market services would be lower by 5.

Structural transformation, marketization, and household production around the world

“…This statement applies to both estimations like Fang and Zhu (2012) and Moro et al (2015) and to calibrations like Ngai and Pissarides (2008), Rogerson (2008), andMcDaniel (2011). Calibrations of the growth model with household production deliver that household productivity stagnates in the U.S., which is also what our imputation implies.…”

“…This statement applies both to estimations like Rupert et al (1995), Fang and Zhu (2012), and Moro et al (2015) and to calibrations of the growth model with household production like Ngai and Pissarides (2008), Rogerson (2008) and McDaniel (2011). Most of such calibrations deliver what our imputation implies, that is, household labor productivity stagnates in the U.S.…”

Gender Gaps and the Rise of the Service Economy

“…They identify ε using the equilibrium condition equating the marginal rate of substitution between (value-added consumption in) goods and services to relative prices, and obtain an estimate of 0.002 , which we use as our benchmark value. Moro, Moslehi, and Tanaka (2017) extend the framework of Herrendorf, Rogerson, and Valentinyi (2013) to allow for home production and also find an estimate for ε that is not significantly different from zero. In Appendix D, we provide some sensitivity analysis for ε .…”

Female market work, tax regimes, and the rise of the service sector

“…Taxes paid as a "percent of average worker wage" are reported in a given year. 13 The OECD (2015b) tax-benefit 12 Moro, Moslehi and Tanaka (2017) show that the growth rate of the market service share only took-off after 1978, while the share of home production only started falling after 1978, making 1977 an ideal starting point for the empirical exercise. 13 The tax computations for singles are reported at 50, 100, and 200 percent of average wages.…”