Homework in Development Economics: Household Production and the Wealth of Nations

8 Pages Posted: 8 Jan 2001

See all articles by Randall Wright

Randall Wright

University of Wisconsin - Madison - Department of Finance, Investment and Banking; Federal Reserve Banks - Federal Reserve Bank of Minneapolis

Richard Rogerson

Princeton University - Princeton School of Public and International Affairs; Arizona State University (ASU) - Economics Department; National Bureau of Economic Research (NBER)

Stephen L. Parente

University of Illinois at Urbana-Champaign - Department of Economics

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Abstract

We introduce home production into the neoclassical growth model and examine its consequences for development economics. In particular, we study the extent to which one can account for international income differences with differences in policies that distort capital accumulation. In models with home production, such policies not only reduce capital accumulation but also change the mix of market and nonmarket activity. Hence these models can generate larger differences in output than standard models for a given policy differential. We also show how the welfare implications change when we incorporate home production.

Suggested Citation

Wright, Randall D. and Rogerson, Richard and Parente, Stephen L., Homework in Development Economics: Household Production and the Wealth of Nations. Available at SSRN: https://ssrn.com/abstract=250788 or http://dx.doi.org/10.2139/ssrn.250788

Randall D. Wright (Contact Author)

University of Wisconsin - Madison - Department of Finance, Investment and Banking ( email )

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Federal Reserve Banks - Federal Reserve Bank of Minneapolis

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Richard Rogerson

Princeton University - Princeton School of Public and International Affairs ( email )

Princeton University
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Arizona State University (ASU) - Economics Department ( email )

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National Bureau of Economic Research (NBER)

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Stephen L. Parente

University of Illinois at Urbana-Champaign - Department of Economics ( email )

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United States

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