DP13554 Inferring Inequality with Home Production
|Author(s):||Job Boerma, Loukas Karabarbounis|
|Publication Date:||February 2019|
|Keyword(s):||Consumption, Home Production, inequality, Labor Supply|
|JEL(s):||D10, D60, E21, J22|
|Programme Areas:||Labour Economics, Macroeconomics and Growth|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=13554|
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. Accounting for home production amplifies welfare-based differences across households meaning that inequality is larger than we thought. Home production does not offset differences that originate in the market sector because productivity differences in the home sector are significant and the time input in home production does not covary with consumption expenditures and wages in the cross section of households. The optimal tax system should feature more progressivity taking into account home production.