Household production and the Elasticity of Marginal Utility of Consumption
2016 (English)Report (Other academic)
Chetty (2006) developed a new method of estimating the Elasticity of Marginal Utility of Consumption (EMUC) from observed work time responses to wage changes and derived an upper bound of 2 for this parameter. Here I show that the omission of household production in Chetty’s model may lead to bias, and perform a numerical sensitivity analysis of Chetty’s results in this respect. I develop a new model that includes household production from which I derive new, unbiased EMUC formulas. I offer empirical estimates based on current evidence of the included parameters, suggesting a lower bound for EMUC of about 0.9.
Place, publisher, year, edition, pages
Stockholm, 2016. , 38 p.
CTS Working Paper, 2016:10
Economics, Household, Production, Mathematical model
Research subject SAB, Qa Economics and finance
IdentifiersURN: urn:nbn:se:vti:diva-10842OAI: oai:DiVA.org:vti-10842DiVA: diva2:952369