Household response to higher costs of domestic services in Ecuador
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An increase in the wage for domestic workers represents an increase in the prices of a close market substitute for home production. This paper analyzes the response of households in the hours of work at home of the female head or wife of the head to changes in the hourly price for domestic services. The results differ between women in the labor force and women not in the labor force, this second group showing an increase in home production associated with an increase in the price for domestic services. Surprisingly, though, the estimation of a home production model predicted a negative response for Ecuadorian women who are employed or looking for a job. That is, higher prices of domestic services were associated with a decrease in the hours of work at home for employed women. A possible explanation for this striking result is that the market for domestic workers has excess demand.