Household production, home improvement, and housing investment among older Americans

We investigate the role of household production in the context of home improvement and investment decisions of older Americans. To calculate the total value of home improvement, we apply a household production model where households can either purchase professional services or combine market goods with their time. We find that household production is a significant source of home investment. Failing to account for the value of time provided by household members greatly understates the total allocation of resources to home improvement. Consistent with standard household models, home production is a substitute for market-purchased services—labor supply is negatively related to the former and positively related to the latter.