Observable and Unobservable Household Sharing Rules: Evidence from Young Couples' Pocket Money
published under revised title in: Economic Development and Cultural Change, 2007, 55 (3), 557-582
The leading evidence against the unitary household models is that "who gets what" is
significantly dependent upon "who earns how much." However, it is difficult to pin down the
causal effect of relative earnings on intra-household resource allocation because households
jointly decide both labor supply and consumption. I utilize longitudinal data to analyze the
spouse's individual budgets – "pocket money." This unique data set allows for the
specification of the simultaneous process of household decision-making in a fully stochastic
fashion. By doing this, it is possible to differentiate unobserved spousal bargaining power
from heterogeneity at the household level. The results imply that the balance of power
between spouses is stable over time and robust to transitory changes in relative earnings.
Public policies targeting the disadvantaged within households should be designed and
implemented on the long-term basis.
Text: See Discussion Paper No. 1250