An empirical re-evaluation of the effects of education in nonmarket production

This paper tests the empirical validity of the productive efficiency hypothesis effect of education in the nonmarket sector via consumption expenditure patterns, which is essentially the foundation in Michael's (1972) behavioral model. Under the assumption of factor and commodity neutrality, the education effect is expected to be positive for luxuries, negative for necessities and zero for market goods inputs whose income elasticity is equal to one.;Much of the innovation of this paper primarily stems from a preliminary and broad attempt to update Michael's empirical work, while focusing on the demand for inputs in the production of "good health", the incorporation of both grouped and individual observations on consumer expenditures household data as an additional comparison tool, inclusion of all four geographical regions and allowing for zero value market good outlays.;By and large, the empirical analysis of this study fails to support the predicted qualitative relationship between income and education elasticities, regardless of sample classification and item categorization. Consequently, it rejects the accuracy of productive efficiency hypothesis in the neutrality framework. Whether these findings are the byproduct of the limitations set by the theoretical model, the type and idiosyncratic nature of the dataset used or by the econometric approach employed, the effect of education on household productivity remains a puzzle and a topic that requires more rigorous investigation.