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Households can be analyzed in terms of individuals within them, and children can be seen as collective goods. This helps explain an increase in female-headed households among people on low incomes. Sex ratios may also be important.

The family is distinguished from other social institutions, such as firms, by its crucial role in the production and nurture of children and its rationale is ultimately to be found in the preferences of individuals for own children. Sexual reproduction means that the production of one's own child requires the participation of another person of the opposite sex. The production of a child who will survive, become a successful adult, and produce his or her own children requires the expenditure of both personal and purchased resources over a lengthy period of time. The cost of time hypothesis follows from the assumption that childrearing is relatively more intensive in the use of mother's time than are non-child-related household production activities. The article permits a rich cross fertilization between family economics and other branches of economics that has already borne fruit many times. There is no alternative theory of demographic behavior that comes close in terms of either scope or power.