A Life Cycle Family Model

The household production model provides a useful theoretical framework in which one may analyze family labor supply issues. In this model, the family is viewed as if it were a small firm producing its ultimate wants within the household. In order to satisfy these wants, the family (firm) combines purchased market goods and services with the time of various family members. This approach differs from the traditional treatment of the labor-leisure choice decision since the price of any activity now has two components â€" the goods price and the time price of each family member. The relative empirical importance of the two components depends, of course, on their respective shares in the cost of producing an activity.