Household Production

Updated Sep 8, 2024

Definition of Household Production

Household production refers to the creation of goods and services by the members of a household, for their personal use, utilizing their own resources. This can include a wide range of activities such as cooking, cleaning, child-rearing, home repairs, gardening, and even education at home. Unlike goods and services produced commercially, household production is not usually traded in markets, nor is it typically included in measures of economic activity like Gross Domestic Product (GDP), despite its significant value to individual welfare and the economy as a whole.

Example

Consider the case of Alex and Morgan, a couple living in the suburbs. Alex is particularly skilled at carpentry and frequently engages in making and repairing furniture for their home. Morgan, on the other hand, has a green thumb and manages a vegetable garden that supplies a substantial portion of the family’s produce needs throughout the summer and fall. Both activities constitute household production as they contribute to the family’s well-being without involving market transactions.

Additionally, they have a small child, and instead of enrolling her in a daycare center—a service that would be purchased in a market—they opt for one parent to scale back their professional work hours to provide childcare at home. This decision reflects another form of household production, emphasizing its diverse nature and impact on household economics.

Why Household Production Matters

Household production matters for several reasons. First, it represents a substantial amount of work and value that contributes to the well-being of individuals and families but is often overlooked in official economic analyses and policymaking. Recognizing the value of these activities can inform better economic policies, especially those related to labor markets and social welfare.

Second, household production can be a source of savings for families, as it reduces the need for paid services. For individuals with limited access to paid employment or those living in remote areas without easy access to markets, household production can significantly enhance living standards.

Third, during times of economic downturn or crisis, such as a recession or the COVID-19 pandemic, the role of household production often becomes more pronounced. Families may rely more on home-produced goods and services when market-produced alternatives become costlier or less accessible.

Finally, understanding household production is crucial for achieving a comprehensive view of labor dynamics and economic welfare. It challenges traditional economic models that do not fully account for non-market activities, encouraging a broader understanding of productivity and economic contribution beyond formal employment and market transactions.

Frequently Asked Questions (FAQ)

How does household production differ from the informal economy?

Household production differs from the informal economy in its purpose and scope. Household production is primarily for the use within the household and does not typically involve monetary transactions or direct exchange of goods and services. The informal economy, on the other hand, includes business activities that are not regulated by the government but involve trade of goods or services, often generating income. While both fall outside the formal market economy, their intents and impacts differ significantly.

Can household production be measured, and how?

Measuring household production poses challenges due to its non-market nature, but economists and statisticians have developed methods to estimate its value. One common approach is the “time use survey,” where individuals report activities they perform, allowing analysts to assign values to this time based on potential earnings or replacement costs (the cost of purchasing these services on the market). While imperfect, such measures offer insight into the significant economic contribution of household production.

Why is household production not included in GDP?

GDP measures the market value of all officially recognized final goods and services produced within a country in a given period. Household production is excluded because it does not involve market transactions—no price is paid for the activity. Including household production in GDP would require assigning market values to all non-market activities, a complex and controversial process, although its exclusion means GDP underestimates the total economic activity and well-being.

How does household production impact gender roles and economic inequality?

Household production significantly impacts gender roles and economic inequality. Traditionally, women bear a disproportionate share of household production worldwide, limiting their time and opportunities for paid employment and contributing to gender inequality in labor markets and incomes. Recognizing and valuing household production could support policies for more equitable sharing of domestic work and care responsibilities, potentially fostering greater gender equity in both household and formal economic spheres.