Home production meets time-to-build

Abstract

An innovation in this paper is to introduce a time-to-build technology for the production of market capital into a model with home production. The paper’s main finding is that the two anomalies that have plagued all household production models—the positive correlation between business and household investment, and household investment leading business investment over the business cycle—are resolved when time-to-build is added.Production (Economic theory) ; Investments