Income and Outcomes: A Structural Model of Intrahousehold Allocation

Income and Outcomes: A Structural Model of Intrahousehold Allocation

1994 | Martin Browning, François Bourguignon, Pierre-André Chiappori, Valérie Lechene
The paper by Browning, Bourguignon, Chiappori, and Lechene explores the allocation of household resources within a multi-person household, challenging the traditional assumption that such households can be treated as a single decision-maker. They develop a method to identify how relative incomes affect final allocation decisions using conventional family expenditure data, assuming that household decision processes lead to efficient outcomes. The authors apply their method to a sample of Canadian couples without children and find that expenditures on each partner depend significantly on their relative incomes, ages, and lifetime wealth. The introduction discusses the limitations of treating households as single decision-makers, highlighting empirical evidence that contradicts the "income pooling" hypothesis. They argue that individual preferences and decision-making processes within households are more complex and should be modeled as multiutility frameworks. The theoretical framework is outlined, including the distinction between private, public, and exclusive goods, and the nature of preferences. The authors derive a formal model of household behavior and show that, under certain assumptions, the intrahousehold allocation can be identified using conventional family expenditure data. An informal empirical analysis using Canadian family expenditure data supports the conclusion that the conventional "single-decision-maker" model fails for couples but not for single individuals. The authors then estimate the parameters of their model using data on couples with no children, focusing on clothing expenditures. They find that the allocation of resources within the household depends on the relative incomes and ages of the partners and the level of lifetime wealth. The paper concludes by emphasizing the importance of considering intrahousehold allocation as a complex process involving individual preferences and decision-making, rather than treating households as a single unit.The paper by Browning, Bourguignon, Chiappori, and Lechene explores the allocation of household resources within a multi-person household, challenging the traditional assumption that such households can be treated as a single decision-maker. They develop a method to identify how relative incomes affect final allocation decisions using conventional family expenditure data, assuming that household decision processes lead to efficient outcomes. The authors apply their method to a sample of Canadian couples without children and find that expenditures on each partner depend significantly on their relative incomes, ages, and lifetime wealth. The introduction discusses the limitations of treating households as single decision-makers, highlighting empirical evidence that contradicts the "income pooling" hypothesis. They argue that individual preferences and decision-making processes within households are more complex and should be modeled as multiutility frameworks. The theoretical framework is outlined, including the distinction between private, public, and exclusive goods, and the nature of preferences. The authors derive a formal model of household behavior and show that, under certain assumptions, the intrahousehold allocation can be identified using conventional family expenditure data. An informal empirical analysis using Canadian family expenditure data supports the conclusion that the conventional "single-decision-maker" model fails for couples but not for single individuals. The authors then estimate the parameters of their model using data on couples with no children, focusing on clothing expenditures. They find that the allocation of resources within the household depends on the relative incomes and ages of the partners and the level of lifetime wealth. The paper concludes by emphasizing the importance of considering intrahousehold allocation as a complex process involving individual preferences and decision-making, rather than treating households as a single unit.
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