Adult equivalence scales are supposed to measure differences in the "needs" of households of different demographic composition. Formally, they purport to measure the change in the cost of attaining a certain welfare level when the family composition varies. This paper shows that the definition and the measurement of these scales depend crucially on the concept of welfare used. When welfare is the utility parents derive from their own consumption, one has to assume separability of parents' and children's consumption. This assumption implies that the only way of imputing the intrafamily allocation of resources is by observing the consumption patterns of adult goods. Regardless of the definition used, one cannot separate the factors reflecting home technology (i.e., "needs") from those determining the intrafamily distribution rule (i.e., "wants") out of consumption data.

Adult equivalence scales are supposed to measure differences in the "needs" of households of different demographic composition. Formally, they purport to measure the change in the cost of attaining a certain welfare level when the family composition varies. This paper shows that the definition and the measurement of these scales depend crucially on the concept of welfare used. When welfare is the utility parents derive from their own consumption, one has to assume separability of parents' and children's consumption. This assumption implies that the only way of imputing the intrafamily allocation of resources is by observing the consumption patterns of adult goods. Regardless of the definition used, one cannot separate the factors reflecting home technology (i.e., "needs") from those determining the intrafamily distribution rule (i.e., "wants") out of consumption data.

The paper tries to formalize the trichotomy of work in the market, work at home, and leisure. Time is used at home to produce home goods that are perfect substitutes for market goods, where home production is subject to diminishing marginal productivity. An increase in the market wage rate is expected to reduce work at home, while its effect on leisure and work in the market is indeterminate. An increase in income increases leisure, reduces work in the market, and leaves work at home unchanged. These conclusions are supported by empirical tests based on the Michigan Income Dynamics data, as well as by previous time budget studies. Further implications for labor supply, fertility, gain from marriage, demand for child care, and the measurement of home output are investigated.

The paper tries to formalize the trichotomy of work in the market, work at home, and leisure. Time is used at home to produce home goods that are perfect substitutes for market goods, where home production is subject to diminishing marginal productivity. An increase in the market wage rate is expected to reduce work at home, while its effect on leisure and work in the market is indeterminate. An increase in income increases leisure, reduces work in the market, and leaves work at home unchanged. These conclusions are supported by empirical tests based on the Michigan Income Dynamics data, as well as by previous time budget studies. Further implications for labor supply, fertility, gain from marriage, demand for child care, and the measurement of home output are investigated.