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A Note on Collective Models of Labor Supplywith Domestic ProductionOlivier DonniUniversity of Quebec at Montreal,CIRPEE and DELTAJanuary 21, 20041IntroductionThe collective model of labor supply, developed by Chiappori (1988, 1992), isnow a standard tool for analyzing household behavior, and its empirical successfor the last 10 years is considerable. One of the most serious criticisms of thismodel, however, concerns the treatment of domestic production. Apps andRees (1997) point out that, if domestic production is not taken into account,a low level of market labor supply will automatically be interpreted as a largeconsumption of leisure, whereas it may in fact reflect the specialization of oneof the members in domestic production. This may invalidate the well-knownidentification results for this model.One answer to these problems is given by Chiappori (1997) who considers acollective model of domestic and market labor supply. As for the simple model,each household member is characterized by a system of egoistic preferencesand the decision process results in Pareto-e fficient outcomes. There are onemarket good which is bought and one domestic good which is produced from atechnologyusingtimeinput. Thelattercanbeconsumedbyhouseholdmembersor exchanged on a market. Chiappori then shows that, provided that domesticand market labor supplies are both observed, the structural model, i.e., theoutcome of the decision process, is fully identifiable (except for a ...