August 2010

IZA DP No. 5138: Independent Individual Decision-Makers in Household Models and the New Home Economics

published in: J. Alberto Molina (ed.), Household Economic Behaviors, Springer: 2011

Much of the recent literature in household economics has been critical of unitary models of household decision-making. Most alternative models currently used are bargaining models and consensual models, including collective models. This paper discusses another alternative: independent individual models of decision-making that don't make any specific assumptions of jointness of decision-making in households. Unitary models are typically associated with Gary Becker even though most of Becker’s own analyses of the family did not use his unitary model. This is especially the case with the specifically independent individual models presented in his theory of marriage. Decision-making models assuming independent individual household members in the Becker tradition are reminiscent of models of labor markets in which firms and workers are independent decision-makers. As basis for econometric estimations, such models may be preferable to models imposing the structure of a game or a household welfare function.