Household expenditure for services as a percentage of total consumption expenditure in Taiwan has continued to grow in the past 25 years. What factors determine this growth? This research uses Becker’s household production theory to model the demand function of services. Data from the household expenditure survey of 1982, 1984, 1986, and 1988 is used for empirical estimation of the demand function. The result shows that household production theory is an appropriate analytical framework for this study. We also find that during the period of 1982-1988, changes of family structure and changes of opportunity cost of time, as well as income growth, account for most of the growth of service expenditure. Although relative prices of services increased substantially in this period, its effect on the changes of household expenditure is relatively small.
