Pollak and Wachter on the Household Production Function Approach

In The Relevance of the Household Production Function and Its Implications for the Allocation of Time, Pollak and Wachter (1975) have provided a valuable analytical interpretation of the theory underlying the home economics. In addition, they have provided insights into serious potential abuses of the household production function approach. However, their identification of one such potential abuse led them to terminate their analysis prematurely with the rejection of the entire shadow-price concept on which much of the new home economics is based. Their conclusion is unwarranted. Pollak and Wachter maintain that joint production is inherently important in household technology, and they argue that joint production breaks the link between the existing household production function approach and the neoclassical theory on which that approach is based. They also argue that joint production results in the of tastes and technology within shadow prices. But such confounding could pose a fundamental theoretical problem only if the postulated confounding can be translated into an identification problem. I shall equate a particular theoretical structural model with the household production function approach. I shall demonstrate that all functions in that structural form do have known neoclassical properties, and I shall discuss the identification of the structure. I shall derive household structure