Douglas Clement — U.S. inequality: It’s worse than we thought

Time spent on home chores increases inequality among American households.…

The idea that income inequality might be tempered by “home production”—with low-income families cooking meals at home rather than eating out; mowing the lawn instead of hiring a service—is both intuitively and emotionally appealing. If families can’t earn big bucks, goes the notion, at least they can provide for themselves and thereby soften the blow of poverty due to low wages and unemployment. The story aligns well with America’s ethic of self-sufficient individualism.

But is that comforting picture a reality, or a myth?

Recent research by Minneapolis Fed economists suggests the latter. In “Inferring Inequality with Home Production” (WP 746, also NBER 24166), Job Boerma and Loukas Karabarbounis find that home production—a factor often ignored by economists—“amplifies … differences among households, meaning that inequality is larger than we thought.” Their mathematical model with both market production (that is, jobs) and household production generates greater inequality than a model that incorporates only market production....

FRB Minneapolis — The Region

U.S. inequality: It’s worse than we thought
Douglas Clement | Editor, The Region

ht Mark Thoma at Economist’s View