Inferring Inequality With Home Production

We revisit the causes, welfare consequences, and policy implications of dispersion in households' labor market outcomes using a model with uninsurable risk, incomplete asset markets, home production. Allowing households to be heterogeneous both their disutility work production efficiency, we find that amplifies welfare‐based differences, meaning inequality standards living is larger than thought. infer significant efficiency differences across because hours working at do not covary consumption wages cross section households. Heterogeneity essential for inequality, as would amplify if only reflected heterogeneity work.