Essays on household bargaining -PhD Thesis-
My dissertation focuses on the testing and identification of models of household decision-making, with an emphasis on bargaining between spouses.
Chapter 1 provides a framework for analyzing the impact of a change in property division law--a natural experiment that affects spouses' bargaining power in a discrete manner--on household decision-making. I focus on the 2000 House of Lords decision ( White v. White ), which led to a more equitable division of assets between divorcing spouses in England and Wales, and estimate its effect on the intrahousehold resource allocation rule using the collective labor supply model. I show that this effect can be expressed as an 'equivalent transfer' of household non-labor income. The 'equivalent transfer' concept is then used to demonstrate that the unobserved components of the underlying decision process (the individual preferences and the household resource sharing rule) can be identified nonparametrically from changes in observed labor supply. Using the British Household Panel Survey (BHPS) for 1991-2006, I estimate the household labor supply to recover the individual preferences and the resource allocation process. The results provide some evidence that this process changed in wives' favor in response to the law change.
Chapter 2 investigates the link between married women's labor supply and the legislation governing property division between spouses at divorce. Using the natural experiment afforded by the House of Lords decision in the October 2000 White v. White case in England and Wales, I undertake a difference-in-differences analysis of reduced-form labor supply functions taking Scottish married women as the control group. The empirical analysis, carried out using the British Household Panel Survey (BHPS) for 1991-2006, reveals that married women in England and Wales reduced their labor supply after the law change. No such effect is present for married men or for single women. Furthermore, the effect of the law change on married women's labor supply depends on the total value of assets at stake.
In Chapter 3, I estimate a household demand system and test a fundamental implication of utility maximization, namely the Slutsky conditions on the demand. The generalization of standard Slutsky conditions to households comprising multiple decision-makers was provided by Browning and Chiappori (1998). This approach allows me to determine the number of decision makers in the household. Past research has shown that restrictions of utility maximization are almost universally rejected when the unitary approach is applied to multi-person households. Using the 1994 Turkish Household Survey, I document that unitary households, whose demand can be rationalized with a single utility function, exist. The results are threefold. First, I reject the unitary model in the full sample of couples in favor of the two decision-maker model. Second, in a smaller sample from rural Eastern Turkey--where traditional values prevail--I find unique evidence in favor of the unitary model and no evidence of bargaining when women do not earn income outside the household. In contrast, when women have outside options, the unitary model ceases to be supported in favor of a two decision-maker model. Finally, the number of decision makers in the household changes depending on the presence of a teenage son (as opposed to that of a daughter).
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