Accounting for Household Production in the National Accounts, 1965-2010

NONMARKET production has long been a subject of interest to national accountants and econo­ mists, dating back at least to the seminal work of Si­ mon Kuznets (1934). Since the inception of the national income and product accounts (NIPAs) in the 1930s, issues have been raised about the scope and structure of the accounts. Kuznets, one of the early ar­ chitects of the accounts, recognized the limitations of focusing solely on the measurement of market activi­ ties and excluding a broad range of other nonmarket activities that have productive value such as household production. And although the national accounts are now recognized as one of the most successful analytical measures in the United States, various supplemental series and accounts have been developed to account for a broader set of activities outside of the market econ­ omy that may offer further sources of economic growth. For example, William Nordhaus and James Tobin in the early 1970s developed a major set of extended ac­ counts that tackled the broader measurement of wel­ fare; those accounts added imputations for government and household capital services, nonmar­ ket work, and a major imputation for the value of lei­ sure. The effect was significant, as the imputations nearly doubled gross national product (GNP) in 1965 (Nordhaus and Tobin 1973).1 Throughout the 1970s and 1980s, Dale Jorgenson with Laurits Christensen, Barbara Fraumeni, and Alvaro Pachon developed a system of national accounts that vastly expanded mea­ sures of consumption and investment (Jorgenson and Christensen 1969, 1973; Jorgenson and Fraumeni 1980, 1989; Jorgenson and Pachon 1983). Jorgenson and colleagues not only accounted for household phys­ ical capital services, household production, and lei­ sure, but they also quantified the impact of investment in human capital on GDP. In a particularly important series of papers, Jorgenson and Fraumeni (1989, 1992a, and 1992b) developed the lifetime incomes ap­ proach to valuing investments in human capital, which in combination with other imputations, added roughly

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