(DP 1984-06) Block Recursiveness of the Household Production Model Under Risk
Abstract
Block-recursiveness of the household production model is a convenient property to have in the analysis of household production relations. We show here that, with perfectly competitive rural markets, block-recursiveness holds when production risk is additive but not when it is multiplicative. Block-recursiveness does not hold under price risk, additive or otherwise. This has some troubling implications for approaches that require homogeneous functions.
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