Abstract
We develop a new approach to assessing the value of home production time based on willingness to spend time and money to obtain environmental improvements. When peoples’ choice is constrained by time as well as money, measures of willingness to pay can be defined with respect to either numeraire. In a model that explicitly allows for multiple shadow values of time, we show that the willingness to pay time and money measures are linked through the value of saving time. With survey information on peoples’ willingness to spend additional time on housework activities, as well as pay money, to obtain environmental quality improvements, joint estimation within a utility-consistent structure produces estimates of both willingness to pay and the value of saving housework time. From the value of saving housework time, the marginal value of housework time can be readily identified. When applied to Korean households’ valuation of water quality improvements in the Man Kyoung River, we find that the value of housework time is 70–80% of the market wage.
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Notes
Such an assumption is required in order to have well-defined compensating surplus measures of welfare change, which are based on tradeoffs of a good (better environmental quality) in exchange for a payment of some type. If spending more time in averting activities were beneficial in itself, the willingness to spend time to obtain environmental improvements would go infinite (or, given the constraints on time availability, to a corner solution such as 168 h per week).
Housework activities might include food preparation, cleaning, laundry, yardwork, and minor maintenance to the house or property. The forensic economics literature often makes the strong assumptions that such activities are fixed in duration and have no value (e.g., Krueger, Ward, & Albrecht, 2001, and Rodgers, 2001), whereas the model of this paper allows time spent in housework to have a positive value which is identified by peoples’ stated choices.
One need not observe the household-specific threshold for housework (which could be zero or positive) in order to estimate its shadow value, as will be seen in the development of the estimation model.
The marginal value of time is also the opportunity cost of time for these activities, since choices are made freely to equate the marginal values and full marginal costs of the activities.
This concept originated with DeSerpa, and is the difference between the marginal value of time in its present use and its opportunity cost, which is its marginal value in other uses. The two are equal when all activity levels are chosen freely, but when choice of one activity (H in this analysis) is constrained, they will differ. If the level of housework could be reduced by one unit of time, the value it would generate in being reallocated to consumption, leisure, or labor supply (w) exceeds the marginal value given up (w − ψ); hence the value of saving housework time is ψ.
The shadow values on constraints are, in their most general form, functions of all parameters of the problem, since they are ratios of Lagrange multipliers. In practice, it seems reasonable to treat them as functions of demographics, so they vary across the sample and population, and are constant for a given individual.
The money budget plus time constraints monetized at their shadow values is \(E+w(T-\overline{H})+(w-\psi)\overline{H}= E+wT-\psi\overline{H}\).
With the increase in housework time, the full income constraint becomes \(E+w(T-\overline{H} -WP^T)+(w-\psi) (\overline{H}+WP^T)= E+wT-\psi(\overline{H}+WP^T)\).
Water quality standards for surface waters in Korea follow a five-tier system. Class I water is considered drinkable when boiled. Class II is swimmable waters, and people would be safe swimming in the river. Class III water is fishable, in that game fish can survive in the water and be eaten without endangering human health. Water in Class IV is boatable, and people would not experience harm to their health if they happened to fall into the river for a short time while boating. Water in Class V does not allow any of these activities (Ministry of Environment, 2001).
The Sae Man Kum project is a large-scale reclamation project which is designed to construct a 33 km dike downstream of the MK River during the period 1991–2006. The completion of the dike is expected to create some 40,100 hectares (ha) of reclaimed land: agricultural land of approximately 28,300 ha and a man-made lake of some 11,800 ha.
Detailed information on (imputed) mean wage by occupation, gender, education, and experience is available from the Statistical Report for Wage Structure (2001), an annual publication of the Ministry of Labor in Korea. Wage rates are imputed because most workplaces in Korea do not use the concept of hourly wage rate, except for part-time workers.
Wage rates are expressed in $US at the exchange rate of approximately 1,300 won/US$1 in November of 2000, the time that survey work was completed.
The assumption that the value of time is a constant per-hour value conditional on the respondent’s employment status and demographics is common in the literature (e.g., Hausman, Leonard, & McFadden, 1995). This seems reasonable for situations where (time and money) prices and budgets do not change by large amounts. When the value of time depends on these variables, finding functional forms for the value of time that are consistent with the hypothesis of two binding budget constraints is considerably more complex (Larson and Shaikh).
Our estimates of the value of housework time can be compared to estimates of the value of home production services reported by the Korean Statistical Agency from the 1999 Daily Time Use Survey. These are monthly values for full-time housework from three perspectives: the value of services housewives provide, the cost of hiring replacement housekeepers, and the opportunity cost of foregone employment opportunities for housewives. Using their estimate of 6.69 h per day of full-time housework, these convert to hourly values of US$5.40 for the market value of the services produced by housewives; US$4.01 for the expense of using hired housekeepers; and US$7.07 as the opportunity cost of foregone employment by housewives. Our estimate of US$5.57 per hour falls within this range.
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Acknowledgements
We thank the Editor and two anonymous reviewers for helpful comments, though any deficiencies are our responsibility alone. This research was partially funded by the Korea Research Foundation (Grant KRF-2001-013-C00071) and research funds provided by Chonbuk National University.
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Eom, YS., Larson, D.M. Valuing housework time from willingness to spend time and money for environmental quality improvements. Rev Econ Household 4, 205–227 (2006). https://doi.org/10.1007/s11150-006-0008-1
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DOI: https://doi.org/10.1007/s11150-006-0008-1