Household Production in the Philippines: A Non-Neoclassical Approach

Abstract

The starting point of any economic analysis is a microeconomic theory of the decision-making unit. By providing a set of explicit assumptions regarding individual choices, a microeconomic theory lays the necessary foundation for the explanation of economic behavior. Just as a theory of the firm underlies analyses of market production, a theory of the family underlies analyses of household production. Explanations of long-run trends such as fertility decline grow out of assumptions regarding the nature of household decision making. Developing what they term "the economic approach" to human behavior, Gary Becker and other neoclassical economists forcefully argue that household behavior is motivated primarily by a collective concern for economic efficiency.' They assume that households seek to maximize exogenously given joint utility functions, and they hypothesize that differences in household behavior represent efficient responses to differences in the prices and incomes which households face. This approach provides the foundation for an explanation of fertility decline based on long-run changes in relative prices associated with economic development. Simply stated, the argument runs as follows. As the rate of return to human capital rises and levels of education increase, the cost of rearing children goes up. As higher wages draw women out of the household into the labor force, the opportunity cost of mothers' time goes up, further increasing the cost of children. The demand for children decreases, and fertility levels gradually adjust.2 The assumption that joint utility functions are exogenous constant over time, and vary randomly, if at all, across households, is crucial to this argument. Systematic differences in unobservable joint utility functions could seriously confound the interpretation of observed relationships between changes in household behavior and changes in rela-