A Transaction Cost Approach to Outsourcing by Households

Below-replacement fertility and late marriage reflect, in part, the incompatibility of women's family and paid work roles. The outsourcing of childcare and housework to market and state service providers offers a strategy for reconciling work-family conflicts. By referring to the household as an organizational unit, I use the transaction cost approach (TCA) of organizational economics to discuss the factors that facilitate or impede outsourcing by households. In my analysis the frequency, specificity, and uncertainty level of the transaction, as well as normative and social beliefs, can facilitate or impede the household's decision to outsource. Monetary considerations, preferences, and government policies might moderate the effect of the transaction cost on this decision. The analysis further demonstrates that gender is an important factor, because transaction costs are often not distributed equally within households.