ABSTRACT
The competencies and skills that individuals acquire through their affiliations with their families and schools ready them to participate in the world of work. Households may reasonably be thought of as engaged in “utility-maximizing” behavior that is analogous to the profit-maximizing behavior of business firms. In addition, both households and employers are constrained by variables over which they have no control. Neither individual households nor employers, as has already been emphasized, can affect such exogenous variables as the economy’s level of employment and GDP, wage and price levels, interest rates, international balances of payments, or the value of the dollar vis-à-vis other currencies. Even if households are only dimly aware of these influences, their impact is by no means trivial and should be borne firmly in mind when examining the theory of household choice as it relates to labor-market behavior.
